Oral Answers to Questions

WALES

The Secretary of State was asked—

Small and Medium-sized Enterprises

Henry Bellingham: When he next plans to meet representatives of the Welsh business community to discuss the impact of central Government regulation on small and medium-sized enterprises in Wales.

Nick Ainger: My right hon. Friend the Secretary of State and I have regular meetings with representatives of the business community to discuss issues that concern them, most recently during our recent visits to north Wales. In addition, my right hon. Friend will be addressing the CBI North Wales annual dinner in May.

Henry Bellingham: Will the Minister confirm that business investment and productivity are falling and that England and Wales have both fallen in the world competitiveness tables? Whatever else happens in his discussions with representatives of small and medium-sized enterprises, will he confirm to them that the Government will ensure that Britain keeps its individual opt-out from the working time directive? Will he confirm that to the House today?

Nick Ainger: The hon. Gentleman, who regularly asks that question at Wales questions, still does not accept that Wales is doing extremely well. Welsh private sector output grew for the 35th month in succession in February 2006, according to the Royal Bank of Scotland, and 4,800 businesses started up across Wales in the third quarter of 2005, a rise of 7 per cent. on the previous quarter. Wales is doing extremely well, and small businesses in Wales are doing extremely well.

Alcohol-related Crime

Betty Williams: What assessment he has made of the incidence of alcohol-related crime in the past 12 months in north Wales.

Peter Hain: It is clear that the Government's approach to alcohol misuse and alcohol-related violence is working, and that police and local partners are getting their tactics right.

Betty Williams: I thank my right hon. Friend for that answer. Does he agree that the press speculation following the passing of the Licensing Act 2003 has proved incorrect? Indeed, the figures from North Wales police show a significant drop in alcohol-related crime. Is that the general pattern throughout Wales? Will my right hon. Friend join me in congratulating all the divisions of North Wales police on their hard work on the Home Office alcohol misuse initiative, which proves that such measures can pay dividends if we all work as equal partners to ensure that our communities benefit from them?

Peter Hain: My hon. Friend is absolutely right to say that a fantastic job has been done in north Wales by the North Wales police, and I join her in congratulating them. In fact, there has been an 11 per cent. fall in all violent crime in England and Wales during the recent alcohol misuse enforcement campaign. All those lurid allegations from the Conservatives, the Liberal Democrats and Plaid Cymru—who formed an unholy alliance on this issue—have proved totally groundless, as the Licensing Act has had a beneficial effect in our local communities.

Elfyn Llwyd: One of the lurid allegations that we were making was that alcohol-related crime would increase late at night. I spoke to a representative of North Wales police this morning and learned that, since the Act came in, there has already been a 4 per cent. increase in alcohol-related crime between midnight and 2 am, and a 2 per cent. increase between 2 am and 4 am. Things are not as rosy as the Secretary of State suggests, and what he has said does not add up with what North Wales police have told me. I wonder who is right. Will the Secretary of State also undertake to review the temporary event notices, under which licences can be granted for 10 events a year, simply by giving 48 hours notice to the police?

Peter Hain: Obviously, I shall be happy to look at that question for the hon. Gentleman. However, I simply do not accept his selective use of statistics, either for north Wales or right across England and Wales, where the picture is very different from all the ritual expectations whipped up by his party, along with its alliance partners in the Assembly, the Conservatives.

Cheryl Gillan: We all know that alcohol-related crime now costs this country more than £7.3 billion a year, and that more than 60 per cent. of male prisoners now have serious alcohol-related problems and need detox and rehabilitation programmes. With Swansea and Usk prisons in the top 10 most overcrowded prisons in England and Wales, how on earth can our Welsh prisons even start to deliver the treatments needed to reduce alcohol-related crime and dependency in Wales?

Peter Hain: The hon. Lady is right to say that alcohol-related crime right across the United Kingdom, including Wales, has been very serious for a long time. It seems to be a particularly British phenomenon—and a Welsh phenomenon as well, for that matter—and we need to bear down on it. I would remind her, however, of what she said before the Licensing Act 2003 came into force. She spoke of "last-minute chaos", and said that the new law would
	"cause increased drinking, damage, street violence and physical harm to even younger people."—[Official Report, Westminster Hall, 25 January 2005; Vol. 430, c. 9WH.]
	None of those things has happened. The hon. Lady's sherry glass—or should I say "Cheryl glass"?—is always half empty rather than half full.

Young People

Martyn Jones: What discussions he has had with the Welsh Assembly Government on funding diversionary activities for young people.

Nick Ainger: My right hon. Friend the Secretary of State and I have regular discussions with Assembly colleagues about matters affecting young people in Wales. The Welsh Assembly Government are investing in a variety of schemes, including the pilot scheme for half-price bus travel for 16 to 18-year-olds and the Cymorth programme, which is aimed at improving young people's life chances.

Martyn Jones: Does my hon. Friend agree that the half-fare bus scheme for 16 to 18-year-olds, which is rolled out in Wrexham and Denbighshire, will make it easier for young people to access leisure activities? Will he ensure that he puts forward his view that it should be rolled out throughout Wales?

Nick Ainger: Yes, but before I respond directly to my hon. Friend I want to pass on my and, I am sure, the whole House's congratulations to Michaela Breeze, David Davies and David Phelps, all Welsh gold medal winners in the Commonwealth games. I am sure that their success will be an inspiration to all young people, particularly in Wales.
	My hon. Friend is right that the proposal is to roll out the scheme throughout Wales. That is a Labour party manifesto pledge, and it will assist young people to get to leisure activities as well as to training and employment. I am sure that he will agree that activities such as the Digilab IT project, which focuses on young people who gather in Wrexham town centre on evenings and weekends, provide good quality diversionary activities for young people.

Stephen Crabb: Given that calls to ChildLine made by teenagers contemplating suicide have been increasing at 14 per cent. a year, and that the suicide rate among 11 to 17-year-olds in Wales is five times that of England, may I encourage the Secretary of State and the Minister to talk to their colleagues in the Assembly about how they can support more effectively those services in Wales working with young people at risk, such as victims of bullying and sexual abuse? Currently, there are far too many gaps in provision for vulnerable young people.

Nick Ainger: I am more than happy to discuss that matter with Edwina Hart, as it would come under her portfolio as well as Jane Davidson's. Perhaps the hon. Gentleman is not aware that young people's partnerships have been set up under every local authority in Wales. Those are made up of various bodies, including the voluntary sector, which impact on young people's lives and can come together to plan and address the issues that he rightly raises. By 2007–08, the Cymorth programme will have a £57 million budget to spend on those initiatives, and I am sure that it can address the issues that he highlights.

Lembit �pik: Does the Minister recognise that the provision of diversionary activities is made harder by the Welsh outdoor pursuits industry's increasing fear of litigationmuch of which, as we both know, is vexatious and unfounded, but is a huge disincentive to providing adventure-based activities nevertheless? In that context, will the Minister act as a conduit for the industry's concerns by being prepared to convey any recommendations from Welsh outdoor pursuits providers on ways to address the litigation culture, perhaps through the Government's welcome Compensation Bill?

Nick Ainger: The hon. Gentleman referred to the Compensation Bill, currently being considered in the other place, which makes it clear that the social value of activities is a factor that a court can take into account when considering a claim for negligence. That would go some way to reassure those companies involved in outdoor activities. The Bill is only part of a programme that the Government are taking forward to tackle perceptions that can lead to a disproportionate fear of litigation and to risk-averse behaviour. As we all know, the hon. Gentleman is not risk averseto his own personal costbut I am sure that he will agree that the Government are addressing this issue. If he wants to direct any organisations to me with particular concerns, I will be more than happy to take up those issues.

Dentistry

Hywel Francis: What discussions he has had with the Welsh Assembly Government on the implementation of the new dental contract in Wales.

Mark Harper: What recent discussions he has had with the Health Minister in the National Assembly for Wales about NHS dentistry in Wales.

Nick Ainger: I regularly meet the Assembly Health Minister to discuss dental services in Wales. A new dental contract is being introduced in April 2006 to improve both patient access and dentists' working lives.

Hywel Francis: My constituency is in the county borough of Neath-Port Talbot, where we have 10,300 new registered dental places as a result of eight pilot schemes established by the Welsh Assembly Government. I thank my right hon. Friend the Secretary of State for the efforts that he put into achieving that, along with our local health board and the Welsh Health Minister.
	May I urge the Minister to make representations to the Welsh Assembly Government to ensure that such pilot schemes become a permanent feature of NHS dental services in Wales, so that all communities in Walesrural, urban or valleybenefit from a comprehensive dental health service in the future?

Nick Ainger: My hon. Friend is right to mention the number of additional NHS dental places in his constituency. As he knows, one company, Denticare, is opening a super-surgery that will provide 10,300 extra places. Moreover, the personal dental service contract will bring further places to the Neath-Port Talbot local health board, bringing the number of new places to some 11,900. An additional 2,100 places will come on-stream by 1 April throughout Wales.

Mark Harper: I am afraid that the rosy picture painted by the Minister will not be recognised by my constituents. In the past few weeks, many of them have received letters from dental surgeries that they attend in Wales telling them that they are no longer welcome on the NHS. Will the new dental contract that will come into force on 1 April mark the end of NHS dentistry in Wales and in England?

Nick Ainger: Yes, it will. [Interruption.] As I said, there will be 200,000 new places in Wales alone. [Interruption.] Let me run through them. Dental Care is establishing practices in Newtown, Brecon, Lampeter, Port Talbot and Swansea. There will be an additional 26,000 NHS places. Integrated Dental Holdings plans new practices in Llanelli, Wrexham and Whitland, where there will be 24,000 extra places. Oasis Healthcare will open eight new surgeries across north Wales, with 80,000 NHS places. There will be new surgeries in Denbigh, Mold, Ewloe, Flint, Rhyl, Caernarvon and Colwyn Bay. That is good news. There will be a comprehensive NHS dental system throughout Wales.

Economy

Jessica Morden: If he will make a statement on the state of the Welsh economy.

Peter Hain: The Welsh economy is strong and has shown considerable improvement in recent years. Indeed, the Bank of Scotland recently suggested that it would grow at an above-average rate in the first half of 2006, and was likely to experience even stronger growth than the United Kingdom average.

Jessica Morden: As my right hon. Friend will know, the success of the economy in Wales has led to a new confidence in the city of Newport. However, the steel industry still dominates the economy in my constituency and is currently struggling as a result of rising energy prices. What measures can be taken to alleviate the impact that that is having on Wales and on the part of the UK that is most dependent on the manufacturing industry?

Peter Hain: My hon. Friend is absolutely right to say that the Newport economy is booming. I know that manufacturing is booming as well: I recently visited EADS and International Rectifier in the Newport area. However, my hon. Friend is also right to say that Corus has suffered a big impact as a result of rising energy costs, which are a global phenomenon. We are working on that as a Government, especially with our European partners. I note that Corus announced huge profits today, and I welcome that. It is a hugely successful business.

Mark Williams: Despite what the Secretary of State said in his answer, I should like to know what message he has for the 100 constituents of mine who have lost their jobs at Dairygold in Felinfach. There is a possibility of 40 more job losses at Iger near Aberystwyth. Does he accept that job losses on that scale in a rural economy have a disproportionate effect on the immediate locality?

Mr. Deputy Speaker: Order. Before the Secretary of State replies, let me say to the House that it is grossly discourteous to colleagues who have questions to ask about Welsh affairs if their questions cannot be heard and it is difficult to hear the Minister's answer. It is also extremely disrespectful to the people of Wales as a whole.

Peter Hain: May I point out to the hon. Gentleman that, yes, any job losses are serious, especially in a rural economy and area such as he describes, but unemployment has come down massively in his constituency under this Labour Government? There are 118,000 more people in work in Wales, business is doing better than anybody can remember and the economy in Wales is stronger than anybody can recall, including in his part of the world. Inevitably, there is a churn of jobs, but job opportunities will increasingly be found for everybody.

Ian Lucas: Production of photovoltaic cells at the Sharp manufacturing plant in Wrexham has tripled in the past two years. The production of such cells offers Britain a huge manufacturing opportunity, but the domestic market needs a bit of encouragement. Does my right hon. Friend agree that, later this afternoon, the Chancellor should look kindly on the photovoltaic sector and get as many householders throughout the UK as possible to have solar cells on their roofs?

Peter Hain: My right hon. Friend the Chancellor has told me not to reveal anything, so I certainly will not, but he is very supportive of renewable energy; indeed, he encouraged a 60 million renewable energy fund for Northern Ireland that I announced recently. The Sharp factory is a beacon for photovoltaic panels; indeed, I have them on my own roof in south Wales. Such developments are part of this Government's commitment to renewable energy.

Cheryl Gillan: The workers in Wales will be very depressed by what the Secretary of State has just said. After nearly nine years of a Labour Government, Wales is still the poorest part of the United Kingdom. Some 28,000 manufacturing jobs have been lost since 1998, Welsh manufacturing dropped by 6 per cent. last year and Welsh industry is facing prohibitive energy prices. What is the Secretary of State actually doing about it?

Peter Hain: I invite the hon. Lady to live in the real world of Wales, for once. Wales is booming under this Labour Government. There are more jobs, greater prosperity and better business growth than ever before and a stronger Welsh economy. She should stop talking Wales down and join the business sector and the rest of us in moving Wales forward.

Cheryl Gillan: It is not Wales that I am talking down; it is the Secretary of State and the Labour Government. Let us turn to Anglesey, which has the lowest gross value added of any region in the UK. If the Wylfa power station shuts down, 1,500 jobs and more than 42 million in wages and salaries will be lost in what is one of Wales's worst employment blackspots. The Springfield plant that provided Wylfa with fuel stopped production this month. Does that mean that the Secretary of State has failed in his discussions with the Secretary of State for Trade and Industry to extend the life of that power station, and how is he now going to avert a social and economic disaster in Anglesey?

Peter Hain: I am working very closely with my hon. Friend the Member for Ynys Mn (Albert Owen), who does a brilliant job in his constituency, to see whether we can extend the life of Wylfa, but there are very real logistical and practical reasons why that is difficult, so we are looking at alternative power supplies. However, it is absolutely clear, as the hon. Lady cannot dispute, that Anglesey's economy is doing better than ever and is in a completely different state from the one it was in under the Conservatives. Then, it experienced a miserable timemanufacturing jobs were lost and businesses were closed right across Wales.

NHS Deficits

David Amess: When he last met the Health Minister in the National Assembly for Wales to discuss NHS deficits in Wales.

Peter Hain: I regularly meet the Assembly Minister for Health and Social Services to discuss a range of issues, including the funding of health services in Wales.

David Amess: As the Secretary of State knows, the cumulative deficit for health services in Wales is predicted to reach 71 million; indeed, it is predicted to reach 100 million by the time of next year's National Assembly elections. Who does he think is responsible for that deficit, and will he explain to the House in clear terms why Government targets have been allowed completely to distort clinical priorities in Wales?

Peter Hain: I see that the hon. Gentleman has applied for Southend to be part of the western tip of Wales. The truth is that his figures are completely inaccurate. The Welsh Assembly Government announced that, according to their best estimate, the hospital deficit will be under 22 million, which is 0.5 per cent. of the 4.3 billion health spend. That is a tiny percentage in the light of an overall record of increasing success and increased spending, which has led to the recruiting of an extra 7,300 nurses in Wales, with more to come.

Si�n James: Will my right hon. Friend join me in recognising the excellent levels of service provided by the burns unit at Morriston hospital in my constituency? Time and time again, it has proved to be the best unit of its type in England and Wales.

Peter Hain: I certainly agree with my hon. Friend. The performance in health right across Walesat Morriston hospital and also at Singleton hospital in Swanseahas been extremely good. That reflects the increased investment that this Labour Government have put into the entire health service in Walesinvestment that would be threatened under the Conservative spending plans.

David Davies: Patients waiting for routine operations in Wales have to wait twice as long as patients in England. Does the Secretary of State agree that the NHS in Wales is an absolute disgrace and that Nye Bevan would be spinning in his grave?

Peter Hain: I certainly do not agree. We are treating and seeing more patients than ever before and waiting times are plummeting. Waiting lists are being reduced, there are more nurses and doctors, and hospitals right across Wales are doing much better. However, all of that would be threatened if Conservative spending plans were ever brought into effect. That is why people should continue to support this Labour Government.

Economic Inactivity

Chris Bryant: What progress has been made in reducing economic inactivity in Wales.

Peter Hain: The number of economically inactive people of working age in Wales fell by 3,000 compared with the same period a year ago, but there is more to be done.

Chris Bryant: The Welsh economy has been transformed in recent years, with more people in work than ever before and a very highly skilled work force ready to do more. My right hon. Friend was unfortunately unable to attend Monday afternoon's launch of the Metrix bid to set up a defence training academy at St. Athan, which would be the biggest ever investment in the Welsh economy. However, does he agree that attracting that investment to south Wales would be a great deal for the Ministry of Defence, and that the Welsh economy would be improved significantly?

Peter Hain: I completely agree with my hon. Friend. That is a bid to build a world-class defence training facility in the St. Athan area, which is an ideal location. He is also right that the number of economically inactive people in Wales, although it remains high, has fallen, despite there being 9,000 extra students in the figures. That shows again that, under this Labour Government, the Welsh economy is doing better than ever before.

Welsh Language

Hywel Williams: What recent discussions he has had with colleagues in the National Assembly for Wales on the current legislative arrangements for use of the Welsh language.

Nick Ainger: I have had recent discussions with Assembly colleagues and the chair of the Welsh Language Board about the Government of Wales Bill, which will give Assembly Ministers important new powers to support the Welsh language.

Hywel Williams: Does the Minister agree that it is the fundamental right of accused people to have the evidence that they present to a court understood by the jury in the language that they chooseWelsh or English? Will he therefore pledge his support for the moves to have all-bilingual juries in certain circumstances in Wales?

Nick Ainger: The Office for Criminal Justice Reform launched a consultation exercise in December 2005. That exercise closes at the end of this month. We will consider the matter further in light of the responses to that consultation.

Energy Policy

Huw Irranca-Davies: If he will make a statement on the review of energy policy in the UK as it relates to Wales.

Peter Hain: The Wales Office is working with the Assembly Government and the Department of Trade and Industry to ensure that Welsh interests are represented at each stage of the energy review.

Huw Irranca-Davies: I thank my right hon. Friend for that response, but does he agree that Wales is uniquely poised to take advantage of initiatives in environmental and green energy, in terms of both job creation and the contribution that Wales can make to the renewable targets? However, does he share my distaste for the way in which Opposition Members flip-flop on the matter? [Interruption.] In this Chamber, they say that they support green energy but, on the ground, they say something completely different. [Interruption.]

Mr. Deputy Speaker: Order. Before the Secretary of State replies, I once again appeal for order. If they are reached, Questions 11 and 12 are just as important as any others.

Peter Hain: I agree with my hon. Friend. This Government are committed to renewable energy, and we have done more than ever before to drive it forward. He is right to point out the hypocrisy on the Opposition Benches. The Leader of the Opposition says that he is in favour of renewable energy and even takes npower juice. However, he has denounced the wind farm off the north Wales coast that produces that energy and attacked it for being a bird blender. We need some consistency from the right hon. Gentleman, instead of these flip-flops all over the place.

Dee Estuary

Ben Chapman: What recent discussions he has had with the First Secretary on the progress of dredging on the Dee estuary.

Nick Ainger: In August last year, the Welsh Assembly Government, the Department for Transport and the Environment Agency granted dredging and disposal consents to the port of Mostyn Ltd. I understand that the dredging activity to date has been well within the authorised schedule[Interruption.]

Mr. Deputy Speaker: Order. I am sorry if I have taken the hon. Member for Wirral, South (Ben Chapman) by surprise, but welcome to Welsh questions.

Ben Chapman: Does my hon. Friend appreciate thatthe Dee estuary is among the most sensitive environmental sites in Europe and, of course, in the United Kingdom? Does he agree that the dredging issue is important, not just for the people of Wales, but for the people of Wirral, and does he agree that we need to keep a close eye on the situation?

Nick Ainger: I assure my hon. Friend that there are conditions attached to the dredging programme, which include monitoring to safeguard the integrity of the nature conservation assets in the estuary. I hope that he is reassured.

PRIME MINISTER

The Prime Minister was asked

Engagements

Celia Barlow: If he will list his official engagements for Wednesday 22 March.

Tony Blair: This morning I had meetings with ministerial colleagues and others. In addition to my duties in the House, I will have further such meetings later today.

Celia Barlow: May I seek to cheer my right hon. Friend with good news from the south coast, where Operation Reduction, a combination of police enforcement and drugs treatment, has led to a 48 per cent. reduction in burglary, a 45 per cent. reduction in vehicle crime and a   26 per cent. reduction in robbery in Brighton and Hove? On this historic 10th Budget day, given the Government's record in crime prevention, may I appeal to him to ensure that Operation Reduction gains a further 12 months' funding from 1 April, and would he like to see

Mr. Deputy Speaker: Order. When I am on my feet, the hon. Lady must sit down. She has had a very good innings.

Tony Blair: I assure my hon. Friend that this programme in her constituency, which has seen such huge reductions in acquisitive crime, will also mean that across the country over the next few months, we will have somewhere in the region of almost double the number of people in drug treatment. That is a very important part of cutting overall crime.

David Cameron: Can the Prime Minister tell us, is this the Chancellor's last Budget?

Tony Blair: What I can tell the right hon. Gentleman is that I think that he will be sitting on that side of the House for a long time to come.

David Cameron: Oh, come on, don't be so coy. Let me put the question in a way that I suspect about 350 Labour MPs would like it put. When is he off?

Tony Blair: I regret to have to tell the right hon. Gentleman that we shall be hereI shall be herefor the time that is necessary to carry through the programme on which we were elected, since, I might just remind him, there was a general election less than a year ago, and for the third time, we won it.

Andy Reed: I am sure that my right hon. Friend the Prime Minister agrees with me that when local schools have problems, they should be given the opportunity to turn themselves around. Will he join me in condemning Leicestershire county council, which is making the decision this afternoon to close Rosebery primary school, without the opportunity for that school to be given a chance to improve itself over the next year? It has taken the council a matter of weeks to come to the conclusion that it wants to close the school, despite the massive support from parents, governors, teachers and the local community to keep it open.

Tony Blair: As my hon. Friend will realise, part of the purpose of the education legislation that we are putting through at the moment is precisely to ensure that local authorities take greater account of the wishes, needs and desires of parents. I know that Rosebery school in his constituency has a very high reputation and I hope that his representations are successful.

Menzies Campbell: After the events of the last week, does the Prime Minister still believe that Members of the House of Lords should be appointed and not elected?

Tony Blair: There will be a debate on that in the months to come, because there will be the opportunity to debate the House of Lords and its composition. In my judgment, it is important that whatever happens after that debateas I have said before, I will listen to it carefullywe do not do anything that challenges the primacy of this House.

Menzies Campbell: The debate would be much better informed if the Prime Minister would tell us his personal view on the subject.
	Can it be right that the Labour party is financially indebted to a Minister of the Crown? Is not that a potential conflict of interest?

Tony Blair: If I may respectfully say so to the right hon. and learned Gentleman, he has had his own problems in relation to party funding for the Liberal Democrats, as all parties probably have. That is why it is sensible that we allow Hayden Phillips to conduct the negotiation on how the system is changed for the future.

Nick Palmer: Does my right hon. Friend agree that we were elected on a clear commitment to introduce ID cards, and that the attempt by some Members of the unelected House to allow criminals and others to opt out of carrying the card is not only anti-democratic but ridiculous?

Tony Blair: It is particularly absurd because the purpose of the amendment is to decouple the passport from the identity card. It is vital and necessaryindeed, it is a requirementthat we introduce the new passport with the biometric details. It is therefore absurd to try to detach that from the introduction of an identity card, which can give so many benefits in terms of preventing identity fraud. It is particularly absurd that the argument now being put by the Conservative party against identity cards is cost, because the whole point of linking the passport to the identity card is that 70 per cent. of the cost is in the passport. So it makes perfect sense to link the two.

David Cameron: The murder of Mary-Ann Leneghan has truly shocked the whole country. Four of the six gang members convicted were on probation when that dreadful murder took place. What steps will the Prime Minister take to ensure that the probation service properly assesses the risk that people under its charge pose to the public?

Tony Blair: That particular case was indeed shocking and appalling. Anybody who has read even the most cursory details could not fail to be sickened by that horrific crime. However, in fairness to the probation service, it is important to state that those people were not on early release, nor were they subject to penalties that involved imprisonment at any stage; they were on probation for far lesser crimes. However, a broader issue is raised not only by this case but by many of the other recent cases, and that is how we monitor offenders through trial, conviction, and subsequentlyif they go to prisonwhen they are released. That is the purpose of the reforms to the National Offender Management Service, which is being introduced by my right hon. Friend the Home Secretary.

David Cameron: Is it not the case that the reorganisation of the probation service, the part creation of the national offender management scheme and the shortage of staff have combined to create a demoralised service? Is not that part of the problem?

Tony Blair: First, we have increased funding significantly over the years. Secondly, I do not believe that that is the problem. The problem is to do with how we track those who may be highly dangerous offenders, and ensuring that instead of treating the offence, we treat the offender. In other words, we must ensurethis is the whole purpose of the reforms that we are introducingthat if someone has a record of violent or sexual crime they are tracked and monitored even when they finish their sentence. The purpose of the changes to the National Offender Management Service is precisely that. I really do not think that it is an issue to do with the funding of the probation service.

David Cameron: While early release may not have been an issue in this case, will he ensure that the review of the probation policy commissioned by the Home Secretary includes the early release schemes, which cause widespread concern and still let far too many prisoners out of prison far too early?

Tony Blair: My understanding is that the early release scheme had cross-party support when it was introduced. Release on parole has been going on for many years. I do not agree that the problem has to do with morale in the probation service or the level of funding. It is to do[Interruption.] I am about to explain. It is about the procedures that we apply to offenders. In my view we have to apply those procedures even when someone has finished their sentence. The problem at present is that someone may be convicted of a violent sexual offence, serve a term of imprisonment and be released from prison once they have served their sentenceand it is at that point that we need new procedures and rules that mean the person is subject to monitoring and supervision and, if necessary, recall, even after they have finished their sentence. That is at the heart of the issue.
	The changes that my right hon. Friend the Home Secretary is making to the National Offender Management Service will be extremely important in making sure that prison and probation work far more closely together. There are real issues to do with how the probation service is organised rather than how it is funded, which need to be addressed.

James McGovern: Two weeks ago I attended an event at my local Tesco superstore to promote its involvement in Fairtrade fortnight, yet two days later, the company announced that it was shedding more than 400 jobs in my constituency, with no prior consultation with either local politicians or trade unions. I have since received correspondence from Tesco indicating that it knew about that decision for more than a year. Will the Prime Minister join me in reminding Tesco that fair trade should mean not only a fair price for the people who supply the tea, coffee and chocolate that the company sells, but a fair deal for the communities in which it locates and the people whom it employs?

Tony Blair: I am sure that my hon. Friend is right, and I hope that any company faced with a situation where it has to make redundancies obeys the proper procedures. The information and consultation directive from Europe should assist in that process. Obviously, I do not know enough about the circumstances in the individual case that he raises, but I am happy to look into it for him.

Ben Wallace: In the light of the recent financial scandals, which is the Prime Minister looking forward to mosthelping the Italian police with their inquiries or helping the Metropolitan police with their inquiries?

Tony Blair: I might respectfully point out to the hon. Gentleman that Labour has been a little more open on the issue of loans than the Conservatives have. However, as we have appointed Hayden Phillips to look into the whole area, the sensible thing is to try to reach consensus on the right way forward, because party political funding is difficult for any political leader.

Adrian Bailey: May I draw my right hon. Friend's attention to the announcement by the Low Pay Commission that the national minimum wage will be increased from 5.05 to 5.35 per hour from October? The national minimum wage was once described as extreme, dangerous and absurd by the previous leader of the Conservative party, so what assessment has my right hon. Friend made of its impact on poverty?

Tony Blair: The latest increase in the minimum wage will benefit about 1.3 million people, 66 per cent. of whomtwo thirdsare women. As a result of a combination of the minimum wage and tax credits, not merely have we lifted many, many families out of poverty, but we have made work pay. The minimum wage is an issue we had to fight strongly

Eric Forth: What about unemployment?

Tony Blair: The right hon. Gentleman shouts out about unemployment, but may I remind him that we have 2 million extra jobs under this Government? I realise that he represents the neanderthal tendency of the Conservative party, which I admire in one sense, because it is so genuine. It used to be said that if we introduced a minimum wage, unemployment would go up, but actually we introduced the minimum wage and employment has gone up.

Stephen Crabb: Could the Prime Minister tell us which of his policies was responsible for the defection to Labour of Mr. Alan B'Stard?

Tony Blair: I am not in a position to comment on Mr. B'Stard, but I believe that the reason why we have managed for the first time in our history to win three general elections, and why the hon. Gentleman's party has spent a longer consecutive time sitting on the Opposition Benches than ever, is that we have combined a strong economy, investment in public services and social justice.

Edward Balls: Does the Prime Minister agree that the prospects for cross-party consensus on tackling the long-term environmental challenge will prove elusive while the main Opposition party continues to oppose the climate change levy?

Tony Blair: I agree entirely with my hon. Friend, and it is worth just pointing out that the climate change levy, I think, now accounts for about 40 per cent. of the reduction in emissions that this country will achieve by 2010. Therefore, support of the climate change levy is a complete test of whether someone is serious about the environmentand whether a party is serious can be determined not by people cycling, or not, to the House of Commons, but by whether they are prepared to take the tough, difficult long-term decisions to reduce CO 2 emissions.

John Pugh: The Deputy Prime Minister said in evidence to a Select Committee:
	we are making more and more decisions on a regional dimension. It is done with regional offices at present which . . . the previous administration set up. I believe that
	it should be
	on elected representation.
	We are inclined to agree with him. Does the Prime Minister? What is he doing to end the colonial government of the English regions and make his right hon. Friend happier?

Tony Blair: As the hon. Gentleman may remember, we did have a referendum in the north-east. There are different ways that we can devolve power. One of the ways that we are doing it is, for example, devolving power to schools in local communities. Local area agreements for local authorities are immensely important. And of course, the regional development agencies have been a major factor in regional regeneration. So there are many models of regional devolution.

Anne McIntosh: When the Prime Minister was elected he promised to rule and be whiter than white. At what point did he change course, and why?

Tony Blair: I would simply point out to the hon. Lady that we have introduced in the Electoral Commission laws, and, indeed, in the party funding laws, transparency for the first time[Laughter.] Yes, it is true that we will have to go further, but I might remind her that prior to 1997, no one knew who funded any political partyin particular, the Conservative party.

Angus MacNeil: Can the Prime Minister explain to the House why, even before the loan scandal and the Metropolitan police investigation, 80p in every pound of individual donations to the Labour party came from people who were subsequently ennobled by him?

Tony Blair: I am proud, actually, that the Labour party has the support of successful business people and entrepreneurs. I am quite sure that that is not the case with the Scottish National partyfor the very good reason that its policies would wreck the Scottish economy.

David Davies: Has the Prime Minister seen the article in The Sun today, featuring 12 people who were murdered by prisoners out on early release? Will he now support the campaign to stop all forms of early release and make Britain a safer place in which to live?

Tony Blair: I point out to the hon. Gentleman that the early release scheme, when it was introduced, had the support of both sides of the House, and that parole schemes have been in existence for many years. We do indeed look at how we can tighten up those schemes, but it would be a mistake to change the whole of that scheme, which, as I say, had support across the House when it was introduced.

John Robertson: Will my right hon. Friend join me in congratulating the sportsmen and women who are doing so well over in Melbourne? Will he also join me inhelping to support the Glasgow bid for the Commonwealth games for 2014, and help us as much as he helped London in winning 2012?

Tony Blair: I certainly join my hon. Friend in congratulating all our athletes on their successes at the Commonwealth games. Let us hope that that continues throughout the remainder of the games. I can tell him that I fully support the Glasgow bidit is an important bidand as Manchester found when it hosted the last Commonwealth games, they bring fantastic opportunities for the city. It has been an amazing thing for Manchester, and has very much helped with the renaissance of the city. I know that Glasgow is doing well in any event, but the Commonwealth games there in 2014 would be a great event.

Tony Baldry: What possible justification can there be for making nurses and other medical staff redundant at the John Radcliffe hospital in Oxford and the Horton hospital in Banbury?

Tony Blair: It is important, surely, to put that into the context of the overall numbers of nurses in the Thames Valley strategic health authority. There have been almost 3,000 more nurses and almost 400 more consultants. Now it is correct that the John Radcliffe hospital has severe financial difficulties. That is why we are looking, with the hospital, at how it can get over thembut let the hon. Gentleman be in no doubt at all that in real terms the increase in the funding is almost 7 per cent., and there has to be a finite amount of money available. What is happening with the new financial system in the national health service is that for the first time, a proper account is being kept and hospitals have to live within their meansand it is important that they do so. In some cases that will mean hard decisions, but as one of the chief executives of one of the trusts was explaining the other day, those are necessary for the long-term health of the national health service.

Huw Irranca-Davies: The whole House will join me in celebrating the fact that this week is the 60th anniversary of the first Bill that introduced the national health service, which was presented by that great socialist Nye Bevan. Does the Prime Minister agree that if Nye Bevan were looking down now, he would applaud[Interruption.] He would applaud the massive unprecedented investment in the health service by this Government. Will the Prime Minister give us a progress report? [Interruption.]

Tony Blair: No wonder Conservative Members are shouting, because on 19 March 1946, the NHS Bill was presented to Parliament to create the NHS, but what did the Conservative party do? It voted against it, just as it has voted against the extra investment that is now renewing our national health service so that we have more nurses and doctors, more operations are being performed, waiting times and waiting lists are falling and, of course, cancer and cardiac deaths are massively down. That is the national health service renewed for the 21st century.

Andrew George: But the Minister of State, Department of Health, the right hon. Member for Liverpool, Wavertree (Jane Kennedy), told me last Tuesday, at column 398WH of Hansard, that my local hospitals trust should be commended for their actions and supported in their proposals to sack 300 staff, cancel operations and cut wards, theatres and other essential services. My constituents, who are losing jobs and services, want to know who is responsible for that. Is it the board, which is appointed by the Secretary of State, or is it the Secretary of State herself?

Tony Blair: Surely the reason why there is a deficit is not that there have not been huge increases infunding. Surely even the hon. Gentleman can understand that there has been an increase every single year in real terms, including one this year of 6.4 per cent., so the West of Cornwall primary care trust is now getting more than 172 million. That has delivered falling waiting times, falling waiting lists and, indeed, more staffbut it is important for his constituency hospital, like the others, to live within its means. There is massive investment going in. It is correct that as a result of the new financial system that is being introduced, hospitals and primary care trusts are having to ensure that they do indeed live within their means. That is important, because whichever Government are in power there will be finite resources. The hon. Gentleman asks what is responsible. Sometimes what is responsible is the fact that hospitals and trusts need to change the way services are delivered so that they deliver the right number of targets that the Government have set down, but do so in a way that prevents them from going into financial deficit. My right hon. Friend the Minister of State congratulated the trust in the hon. Gentleman's area not because anyone wants to see anyone made redundant, but because it is important to do what I have described.

Ian Lucas: When Feargal Sharkey opened a new music studio in central Wrexham recently, an orderly queue of young people formed to make their bookings. Will my right hon. Friend commend the Department for Culture, Media and Sport and Wrexham borough county youth service on their excellent initiative of opening the studio? Will he urge all hon. Members to open up space in their constituencies for a very loud and open rock music studio, because such studios engage our young people?

Tony Blair: My hon. Friend is absolutely right. I was trying to think back in my memory which band Feargal Sharkey was a member ofthe Undertones, am I right? I am sure that the initiative will be absolutely excellent. It is one of the things that enables young people to get fully involved in the joys of music.

Adrian Sanders: More than 8,000 people were on a waiting list for NHS dental care last year in my constituency. Thanks to the hard work of the primary care trust, that was down to 3,000 until this Monday, when a major NHS dental practice pulled out of care, meaning that the figure is back up to 9,000. When will the Prime Minister get a grip on the NHS dental crisis in this country?

Tony Blair: The majority of dentists are agreeing to the new contract, but it is true that some are not. We are therefore bringing new dentists in and training more dentists, because we have opened a new dental schoolbut as I have explained before, we cannot force dentists to come into the NHS contract if they do not want to. I am pleased to say, however, that about 90 to 95 per cent. of them are coming in. I am sorry about the people in the hon. Gentleman's constituency, but we cannot force people to be part of the NHS dental contract. I point out, however, that for 5 per cent. less work it is now paying 80,000 a year.

David Heath: Last week I asked the Prime Minister a perfectly straightforward question about long-term care of the elderly, and he gave me a totally inadequate reply about pensions. So can I ask him again: why do elderly people in this country continue to have to sell their homes to pay for their care in old age, eight years after he said that he would leave the country if that was still the case?

Tony Blair: I am sorry if the hon. Gentleman thought that my reply was inadequate. What I actually said to him was that we have put a lot more money into help for elderly people and their care, but there is a limit to the amount of resources that we have.

Hugh Bayley: Last year, despite rising oil prices, the UK had the highest economic growth rate in Europe. We used to have more than 10,000 unemployed in York; now the figure is below 2,000. How have our Labour Government managed to avoid the recessions that we had when the Conservatives were in power?

Tony Blair: That is due to the strong economic management of my right hon. Friend the Chancellor. What we have now is the longest period of sustained economic growth that this country has had. We have low interest rates, low inflation, high employment and low unemployment. That, of course, is enabling us to make the investment in the public realm and the public infrastructure that is also delivering better schools and better health care.

John Butterfill: Would the Prime Minister agree that public confidence in the office of the parliamentary ombudsman is fatally undermined if when she produces a detailed and lengthy report on the scandals in the pensions industry, its findings and recommendations are dismissed out of hand by the Government?

Tony Blair: They are not dismissed out of hand, but I think I am right in saying that even those on the Conservative Front Bench have made it clear that they cannot commit to the 15 billion that accepting the recommendations would mean. In the end, that is 15 billion that has to come from the general taxpayer. It is not that we reject the ombudsman's findings out of hand, but they come with a financial cost, and the financial cost is huge. If it really is 15 billion, the hon. Gentleman would have to accept that that is something that the country could not afford.

David Kidney: Now that the Treasury and the Department for Education and Skills have announced the extra money for youth services in England, will my right hon. Friend encourage local politicians to reach out to young people directly to ensure that they decide how the extra money is spent on facilities for them?

Tony Blair: As a result of the additional money put into skills, we now have about 300,000 or more apprenticeships in the country, and very large numbers of peoplehundreds of thousands of themare being helped through to skill levels for the first time. The results of the extra measures, and also, of course, of the further education White Paper that will be published shortly, will allow us to expand significantly the help that we give people, not merely when they are at school but when they leave school and urgently require reskilling.

George Young: Could the Prime Minister have another shot at a question he was asked 20 minutes ago: is he in favour of a predominantly elected House of Lords? Yes or no?

Tony Blair: I have said before when I have answered that question that I will wait for the debate and I am not going to commit myself. It is important that we do that. [Interruption.] The right hon. Gentleman has to accept that there are different views on an elected House of Lords everywhere, and I am not going to express mine at this moment in time. However, there will be an opportunity for the House to vote on this at a later point in time. The one thing that I have said before, and I say again now, is that I will not do anything that challenges the primacy of this House, and it is important that we avoid ending up with gridlock between the two Houses of Parliament.

Meg Hillier: At the end of last year 5 million more people visited Government-funded museums than in 2001, when this Government made admissions to those museums free. That is a 66 per cent. increase in visitor numbers. Does my right hon. Friend agree that that is a triumph for a policy that allows people equal access to culture, regardless of their income?

Tony Blair: My hon. Friend is absolutely right. [Interruption.] Opposition Members may laugh, but as she says, that means an extra 5 million visits. There has been an increase of 66 per cent.; visits to London museums rose by 65 per cent. That means that young people particularly, often for the first time, have the chance to go to museums, as do others for their leisure. They are therefore able to see some of the best museums in the world. If anything indicated the strength and correctness of the policy, it is that there are two thirds more visitors today than when we came to office.

Crispin Blunt: Why did the Prime Minister not ask the Electoral Commission to investigate the party loans issue?

Tony Blair: We have abided by the party loans rules completely. Again, I say to the hon. Gentleman that whereas we have now put out all the names[Hon. Members: Oh!] Oh yes; whereas we have disclosed those names, his party has not.

Jim Devine: Will my right hon. Friend join me in congratulating West Lothian district council, a Labour council, which last week was voted the best performing council in Britain? Will he congratulate Graeme Morrice and Alex Linkston, the chief executive, on their leadership, and does he agree that not only is Labour working nationally, but Labour works locally?

Tony Blair: I am delighted to congratulate West Lothian council, the leader of the council and everyone who is part of it in my hon. Friend's constituency. It shows the important role that Labour local councils play up and down the country.

Orders of the Day
	  
	WAYS AND MEANS
	  
	Financial Statement

Mr. Deputy Speaker: Before I call the Chancellor of the Exchequer, it may be for the convenience of hon. Members if I remind them that at the end of the Chancellor's speech, copies of the Budget resolutions will be available in the Vote Office.

INTRODUCTION

Gordon Brown: It is a great honour and privilege to deliver a 10th Budget. Hon. Members may be aware that the last Chancellor to deliver 10 Budgets in a row was Nicholas Vansittart in 1822. In order to win the House's indulgence to be able to deliver so many Budgets, he did of course have to agree to abolish income tax. I regret to inform the House that that is a precedent that I do not intend to followat least this year. I can also tell the House that, for Mr. Vansittart, being Chancellor was preparation for his next important position in government: Chancellor of the Duchy of Lancaster.
	The British economy is strong and strengthening. I can report that inflation is currently 2 per cent. and on target. From the latest quarter, the economy is growing at an annual rate of 2.5 per cent. and on target, as we enter the 10th year of growth under this Governmentthe only Government in British history to be entering the 10th consecutive year of uninterrupted economic growth. With the world's pace of economic change accelerating, this is a Budget to strengthen Britain further for the global opportunities ahead: to lock in stability, but also to lead the world in new industries and technologies, which will increasingly shape our future; for British people, higher skilled jobs with higher wages, but also new choices for parents to balance work and family life; to invest in and reform public services, housing and infrastructure; and, building on the climate change levy, to meet the energy and environmental challenges. Most of all, this is a Budget for Britain's future to secure fairness for each child by investing in every childa modern Britain that leads on enterprise and prosperity, because we lead in opportunity and fairness.
	For 50 years, Britain's economy was prone to high and volatile levels of inflation, and our first challenge was and is not just achieving low inflation today, but entrenching a culture of stability that allows Britain to invest for the long term. I can report that we have met our inflation target this year and every year since 1997; and looking five years and 10 years ahead, under current policies, inflation is still expected to be in line with our target. In just a decade, long-term inflationary expectations have virtually halved to 2 per cent., and today long-term interest rates are the lowest they have been for 40 years, at just 4 per cent.
	Indeed, even when facing in succession the Asian crisis, the IT bubble, an American recession, euro area stagnation and, most recently, the challenge of the oil shock and house price inflationchallenges which in previous decades led to British recessionsour economic framework for stability has proved resilient, robust and prudent.
	On Black Wednesday in September 1992not so long ago, as the Leader of the Opposition will rememberinterest rates reached 15 per cent. Since 1997, interest rates have averaged 5 per cent.
	Mortgage rates, which averaged 11 per cent. between 1979 and 1997 have since then averaged just half of that at 6 per cent. I have said before: no return to boom and bust.
	In new measures, I propose to entrench stability today. We will continue to have the strength to take the long-term decisions that matter.
	First, since 1997, my approach has been that day-to-day management of monetary policy be independent of Government and the same principled approach be applied in other areas: to competition policy, industrial policy, small business policy and the management of debt. Today, I am publishing a new remit for the debt management office. Last year, our stability enabled us for the first time in a generation to issue bonds with maturities of up to 50 years. I can announce that in the next issue, long-dated gilts will increase from just under half to just under two thirds, reflecting the benefits we now gain as a country from long-term stability.
	Today, I am also publishing the detailed proposals, modelled on Bank of England independence, for official statistics to be the responsibility of an independent board, and for enhanced accountability to Parliament.
	I am also publishing today the new memorandum of understanding between the Treasury, the Bank of England and the Financial Services Authority so that Britain has in place the most up-to-date early warning and response system to deal with any risk to financial stability.
	We will continue to be vigilant over global imbalances and oil prices.
	We will take no risks with inflation at home. The public sector pay settlements will show settlements this year averaging just 2 per cent., combining fairness in pay, with more for nurses, with vigilance and discipline in the fight against inflation.
	It is Britain's new economic stability, and also our commitment to free trade, open markets and scientific progress, and our willingness to invest, that make our country better placed than ever to be one of the global economy's success stories. A year ago, some said that the doubling of oil prices would push our inflation far beyond target and that a recession was required to slow the increase in house prices. Instead, I can confirm to the House, as stated in the pre-Budget report, that growth will be 2 to 2 per cent., followed in 2007 and 2008 by growth of between 2 to 3 per cent.
	Domestic demand is expected to grow this year by 2 to 2 per cent., strengthening to 2 to 3 per cent. in 2007 and 2008. As industrial production grows, exports are projected to rise by between 5 and 5 per cent. and 4 and 5 per cent. in 2007 and 2008.
	Since 1997, economic growth in the euro area has averaged just 2 per cent.in France, just over 2 per cent; Germany, 1.4 per cent.; Italy, 1.4 per cent.; Japan, just over 1 per cent.but in Britain, growth has averaged 2.8 per cent. a year since 1997. Britain stands with the USA and Canada as the fastest-growing economies of the G7.
	This is the 10th successive year that we have grown faster than the rest of Europe.
	In fact, we have not only achieved growth in every quarter of every year since 1997, but, averaging 2.8 per cent., our growth rate now is significantly higher than the 2.1 per cent. average of the period 197997. Before we came to office, Britain was seventh out of seven in the G7 for national income per head. Figures published today show that since 1997, as a result of stability and sustained growth, Britain has risen from seventh to sixth, then to fifth, fourth, then third, and we are now second in the G7second only to America in national income per head.
	The test of our monetary policy is that we are achieving sustained stability and growth not just for a year or two, but for the long term. The test of our fiscal policy is that we match a commitment to balance the current budget over the economic cycle with the ability to make the necessary long-term investments. Figures for the current budget from now to 201011 are minus 11 billion, minus 7 billion and then surpluses of 1 billion, 7 billion, 10 billion, and 12 billion in successive years.
	So we meet our first fiscal rulethe golden ruleand we do so by a margin of 16 billion. This 16 billion surplus contrasts with a deficit in the last economic cycle from 1986 to 1997a deficit of 157 billion under the previous Government, and we are well placed to meet our golden rule in the next cycle too.
	The purpose of our second fiscal rule, the sustainable investment rule, to keep debt at a prudent and sustainable level of income, is to end the situation where, under Governments of both parties in the past, Britain was plagued, as everybody knows, not just by stop-go in the economy, but by stop-go in capital investment. So meeting our second fiscal rule allows us to combine stability with the necessary long-term investment in transport infrastructure, health, education and science. As a result of our success so far, total net public investment, which was just 5 billion a year in 1997, is this year 26 billionfive times as high.
	Schools capital investment, which was just 600 million in 1997, is 6 billion this year, and even after inflation we have invested 32 billion since 1997 in modernising our schools in just nine years, compared with just 14 billion in the 18 years before. We have invested twice as much in half the time. To meet the infrastructure needs of business we have been able to double investment in skills, transport, and science, yet even with such levels of investment vital to our economy, we are still comfortably meeting our second fiscal rule.
	Net debt is now 47 per cent. of national income in France and in America, 62 per cent. in Germany, 83 per cent. in Japan and 100 per cent. in Italy. This year in Britain it is 36.4 per cent. of national income. I can report that in future years debt will be 37, 38, 38, 38, and 38 per cent. of national income successively, so we meet our second rule over the cycle, and we do so by a margin of 26 billion.
	Net borrowing, which was 90 billion just over a decade ago, will be 37 billion this year, 36 billion next year, then 30 billion. It will fall to 25 billion, 24 billion and 23 billion in 201011 as we borrow to invest, borrowing in that year 1.5 per cent. of national income, compared with 8 per cent. just over a decade ago. In line with what I said in the pre-Budget report, net borrowing adjusted for the economic cycle will fall in future years from 2.4 per cent. of national income to 1.9 per cent. and then in successive years it will fall to 1.6 per cent., 1.6 per cent., 1.6 per cent. and then 1.5 per cent.
	For this Budget I received representations to increase investment in skills, transport, infrastructure and science. I also received representations that we should adopt a third fiscal rule, that over the economic cycle and regardless of the needs of the economy, infrastructure and services, public spending and investment must, as a matter of principle, always rise more slowly than growth. Having analysed this proposal against our published plans, I have found that it would require in the coming year public spending 17 billion lower than this year and 16 billion lower the year after, closing off the possibility of additional investment. I have rejected these representations.
	We are consistent that facing the economic challenge ahead we still, as a country, need to invest more. Meeting our fiscal rules and in line with our published plans, public investment to meet our infrastructure needs will rise from 26 billion this year to 29 billion next year, then 31, 32, 34 and 36 billions in the years ahead. And gross investment will rise from 48 billion this year to 63 billion in 201011. That sustained long-term investment in our education and infrastructure and in our future is possible because of the stability that we have achieved. So, Mr. Deputy Speaker, we can meet our fiscal rules, support the needs of business and make necessary long-term investments in, first, science, innovation and enterprise, secondly, infrastructure and transport, thirdly, security and the defence of our country and fourthly skills and education.
	I turn first to science, enterprise and innovation. With the right long-term decisions, I believe that Britain can lead in some of the fastest growing and highest value-added sectorsCity and business services, education and health, creative industries and science-based industries. Once small, now one third of our whole economy and one third of our exports, soon those industries will have a much higher share of jobs and wealth. In each one of those areas, I am proposing today to do more to support the dynamism and enterprise of our businesses.
	I start with the importance of Britain's leading in scientific invention and discovery. The Secretaries of State for Health and for Trade and Industry are today announcing that to strengthen medical science and excellence in basic research, Britain will in future have a single budget for the Medical Research Council and NHS research, which will be worth at least 1 billion a year. America has its path-breaking national institutes of health, and we will now build agreement on the right design and institutional arrangements for a British model. To make best use of the additional 1.5 billion a year we invest in scientific discovery, we are proposing today a change of policy. We are setting out plans for a radically simplified allocation of the research funding that goes directly to universities.
	We are continuing our policy of making industrial policy more independent and at arm's length from Government. We will refocus around business's own priorities, and 180 million is now available for investment in cutting-edge technologies. Every advanced industrial country knows that falling behind in science and mathematics would mean falling behind in commerce and prosperity. So the Secretary of State for Education and Skills is announcing today a comprehensive programme for recruitment, retraining, retention and reward of 3,000 science teachers, a new entitlement to study the full range of science subjects at GCSE level and the funding of after-school science clubs starting in 250 schools. And to ensure that that investment is matched by performance in our schools, we will benchmark science results just as we now benchmark English and mathematics.
	Britain's stability and our commitment to openness and free trade make us well placed to attract business investment from around the world. In the past 10 years, business investment has grown on average at 5 per cent. a year, compared with 3.4 per cent. in the previous 10 years. Ten years ago, British business investment was 77 billion a year; this year it is 113 billion. We expect that in the next two years business investment will grow faster than the economy at 4.5 to 5.25 per cent. in 2007 and 2008, rising to 126 billion in 2008.
	Since 1997, there are more than 500,000 extra new businesses, and there are an additional 105,000 self-employed men and women. There is growth in every region, reflecting the dynamism and breadth of Britain's growing entrepreneurial culture. In the cycle that ended in 1997, productivity growth averaged 2 per cent. a year. In the current cycle, it is 2.3 per cent., which is a rate of productivity growth higher than at any time since the '60sthe result of our stability. After decades behind, Britain has caught up with Germany in productivity, is ahead of Japan and has halved the gap with France.
	In total, there are now 4.3 million businesses and 3.7 million self-employed. To meet and master global challenges, it is right today to do more to back our enterprise culture.
	To boost creative industriessoon to be 10 per cent. of our economyas well as modern manufacturing, we are expanding the successful R and D tax credit by doubling the size of companies that can claim higher credit. With the aim of trebling our education exports, which will soon be 50 billion of our economy, we are signing new education partnerships with India, Russia and South Africa and China. To make Britain more attractive for overseas students, from May this year the Home Secretary will make it easier for those with specialist skills who graduate from English universities to work here for one year.
	Alongside a new City of London taskforce to promote British financial services globally, and backed by a new British advisory board and council, the Foreign Secretary and the Secretary of State for Trade and Industry are announcing a revamped UK Trade and Investment, which will set new targets for expanding trade with China, India and emerging economies, and for making Britain the location of choice for international business.
	Growing companies need venture capital, so we will refocus tax incentives for venture capital, with a 30 per cent. relief for investments in venture capital trusts. From today, twice as much investment as before will be eligible for income tax relief in enterprise investment schemes.
	Since 1997, corporation tax has been cut from 33p to 30p, small business tax from 23p to 19p, and capital gains tax for long-term business assets from 40p to 10pa corporate tax system that we will continue to discuss with business and keep internationally competitive. I agree with employers who have suggested that for low-paid workers there is a case for better alignment of the national insurance and income tax systems, so we will conduct a review in time for a consultation after the pre-Budget report.
	Small firms with high growth potential also need equity finance, so I can announce 100 million of new money to double enterprise capital funds. Modern manufacturing in Britain will benefit not only from expanding the R and D credit, but the growing role of the manufacturing advisory service and a smaller number of business services offering more targeted support.
	Today I can announce the formation of a national enterprise network of more than 200 schools: new summer schools in enterprise, including scholarships to American business schools for young British entrepreneurs.
	In the last Budget, I announced that Britain would pioneer risk-based regulation. Today, the Government publish our code based on a legal requirement for inspection only where there is risk. Risk-based regulation will work best if it is applied not only here, but in the European union. We are asking the European Council tomorrow to adopt the same risk-based approach in the interests of British and European competitiveness.
	Incomplete liberalisation of energy markets is one factor in high gas prices. So, again at the European Council tomorrow, we propose that all energy and other sectors which fail to liberalise and open up to competition be subject to independent investigation and enforcement.
	Nowhere does the current restructuring of the global economy impact more than on jobs and on skills. A Britain that thinks long term and thinks globally will not compete on low skills but invest in the higher skills. The new deal enacted the principle of an active labour market policy for any person out of work, and the economy has generated 2.4 million additional jobs since 1997. The claimant count, which was 1.7 million then, is today, even after recent rises, 920,000800,000 lower. Britain has 75 per cent of adults in work, which is a higher rate than America or the European Union, and there are 170,000 more people in work than when I gave my Budget a year ago. If we had Euro areas levels of employment, we would have 3 million fewer jobs.
	But while other countries have yet to succeed in the fight against mass unemployment, the new deal in Britain is now rising to a new challenge. Today, the British economy has just 9 million highly skilled jobs. By 2020, it will need 14 million highly skilled workers. And of 3.4 million unskilled jobs today, we will need only 600,000 by 2020. Employers rightly tell us that their greatest long-term need is a skilled, flexible labour force. With the typical worker changing jobs seven times during a working life, investing in skills and the ability to re-skill will make Britain the most flexible economy of the future. So this Government will not abolish the new deal, which has helped more that 1 million people into jobswe will strengthen it as a new deal for skills and jobs. The Leitch review is now considering a far-reaching proposal under which Britain can lead in skills: how to bring together at a local level employment and training services for not only the unemployed, but all who seek new skills.
	Thanks to the national employer training programme, 100,000 women workers are gaining skills for the first time. Following the recommendations of the women and work commission, I can today announce new help for working women who want a wider range of career choices offering higher earnings and to close the pay gap with men. We will double available training for women with low skills, we will increase the work credit, and from October we will increase the minimum wage to 5.35 an hour. And we will address the unacceptable discrimination in women's pay.
	As the cities paper published today shows, our cities and largest towns are our biggest job creators, but they are also the home of most unemployment in our country. So the Ministers with responsibilities for communities and for work are setting out measures, first, to help 30,000 more lone parents into work and, secondly, to pilot partnerships with the voluntary sector and local authorities for thousands more jobs.
	We are well on our way to meeting our objective of 2 million new homeowners since 1997. After 160,000 new homes built last year, there are now already an additional 1.8 million homeownerssomething that has been possible because of low mortgage rates. But Government must also help to balance supply and demand. Our priority, as the Barker report recommended, has been: first, to speed up planning; and secondly, to release more public sector land, now and in the future, to build 100,000 more homes. To attract more capital into house building, we are now legislating to introduce for Britain the real estate investment trusts that are so successful in the USA. To help finance necessary new infrastructure, our policy is that local communities should retain more of the planning gains that are generated in their area.
	Britain is pioneering shared equity to bring home ownership within the reach of first-time buyers. The Deputy Prime Minister is today allocating 970 million for shared equity that will help 35,000 new homeowners get their first step on the ladder of home owning in this country. The Minister for Housing and Planning is inviting housing associations, local authorities, builders and building societies to offer shared equity, and we will now pilot minimum holdings as low as 25 per cent. We will also pilot a new scheme so that instead of tenants continuing to have to use housing benefit to pay their rent, the same money is used to bring sites back into use and to build new homes.
	The climate change levy, the resulting climate change agreements, and the Carbon Trust funded by it have cut carbon emissions in this country by a total of more than 28 million tonnes. That is why we are already able to meet our Kyoto targets. In each of the next five years, these climate change measures will cut emissions by more than 6 million tonnes, and, as the Prime Minister said, they will account by 2010 for 40 per cent. of our total carbon reductions.
	Because of the climate change levy, 10,000 businesses have signed climate change agreements. Under the Carbon Trust funded by the levy, 3,000 businesses have reduced their emissions. Enhanced capital allowances have underwritten investment in 13,000 energy-saving products. So I reject representations to abolish the climate change levy. I can confirm today our resolve to continue to reduce emissions, including through the climate change levy. Having kept the climate change levy at its original level for its first five years, it is my intention that for 2007 we index the climate change levy in line with inflation. As before, we will continue to return its revenue directly to business, and we will consult them on the most effective way of doing more to support investment in energy efficiency and the environment.
	Our supply of energy should be stable, secure, competitive and environmentally sustainable. With 98 per cent. of emissions occurring outside Britain, climate change is a global issue which demands global solutions. Our first ambition is an international framework, and I can tell the House that at the heart of this is this Government's plan to strengthen and extend beyond 2012, as the Environment Secretary has said, the EU emissions trading scheme.
	The developed world has a responsibility also to help developing countries meet their energy needs, so at the World Bank meetings in April, we will propose a World Bank facilitya $20 billion fundfor developed economies to invest in alternative sources of energy and greater energy efficiency for developing countries.
	We want also to be a world leader in the discovery and development of new energy technologies. Following a joint study with the Norwegian Government, we have found that carbon capture and storage in the North sea can reduce emissions from gas and coal power stations by 80 per cent. So we are today publishing proposals for industry-wide consultation to move this important environmental advance, which will cut emissions, from research to commercial development.
	Britain also has a unique opportunity to lead the development of all low-carbon technologies to meet the challenge of climate change. After discussions in recent weeks with some of the world's biggest energy companies, they have agreed to work in partnership to create for Britain a new energy and environmental research institute. For it to become, for Britain, at the cutting edge of science and engineering, our aim is that the public and private sectors together raise finance of 1 billion.
	Britain must lead not only in environmental research, but in the exploitation of new sciences. So to help British companies to commercialise new environmental technologies, we are setting aside an initial sum of 20 million as seedcorn finance for the first enterprise capital fund for the environment.
	The energy used in buildings accounts for nearly half of UK carbon emissions, so our next ambition is for Britain's homes and businesses to be the most energy efficient in the world. Regulations to take effect next month will improve the energy efficiency of new buildings by 40 per cent., compared with 1997 standards. But we will now do more. In the climate change programme review published next week, the Secretary of State for the Environment will announce additional incentives and cash support to pilot smart metering and a new labelling scheme highlighting the energy efficiency of consumer goods. And I can announce today, following an agreement reached this week with energy companies, a major extension of help for insulationan additional 250,000 homes over the next two years. With every pensioner and low-income family eligible for special help, from 1997 to the end of this Parliament a total of 2 million more British homes will have been insulated.
	I can also announce a fund, initially 50 million, for microgeneration technologies which make it possible for homes and businesses to generate their own renewable energy. The purpose of this fund is to show how we can make these technologies, from wind turbines to solar heating, affordable to schools, housing associations, including local authority tenants, and businesses. Initially, it will cover 25,000 buildings.
	While half of carbon emissions come from buildings, a quarter come from vehicles. So today I want to do more to encourage cleaner fuels and cars. I propose to radically reform vehicle excise duty. I am introducing, to take effect tomorrow, a zero rate for a small number of cars with the very lowest carbon emissions, which will pay no duty at all. Instead of 75 for cars with low emissions, we will have significantly lower rates of 40. Duty rates from today will be zero, 40, and then 100, 125, 150, 190 up to a new band of 210 for the small number of new cars that are the most polluting1 per cent. of all cars. This will help to pay for 5 million more fuel-efficient cars to have their duty cut. As a result of our decisions, and at an eventual cost of 10 million a year to the Exchequer, the duty paid on 50 per cent. of cars will be frozen or reduced from tomorrow. Instead of just 300,000 motorists paying 100 a year or less, 3 million will now pay 100 or less.
	To reduce carbon emissions further, 5 per cent. of fuel will be made from biofuels by 2010, with support and incentives that will, with the 20p duty differential, be worth up to 35p per litre by 2008. It is our policy that each year fuel duties should rise at least in line with inflation, as we seek to meet our targets for reducing emissions and to fund our public services. But for the fourth successive Budget, because of high and volatile prices in the oil market, I propose to defer the usual inflation increase until 1 September. I will maintain the duty differential for rebated oils. And next week, when she publishes the climate change review, the Secretary of State for the Environment will set out her plans for a proposed annual carbon report. I can tell the House that the measures we announce today are essential for the progress in cutting carbon emissions that we all want to make.
	The Budget task is to strike the right balance between tax cuts that are affordable, investments that are essential, and stability that is paramount. In striking the balance between tax, spending and borrowing, I am able to do more for hard-working families. Taken together, child benefit and the child tax credit effectively mean no income tax liability for a two-child family with earnings up to 425 a week. So 3 million of Britain's 7 million families with children have their income tax liability effectively wiped out by this family tax cut.
	I have examined which tax decision could do most for families in future. We are raising the personal tax allowance from 4,895 to 5,035. One option would be to raise that personal tax allowance further. But spending 500 million on a family tax cut in this way would give a two-child family on median earnings of 24,000 a year 22 a year more, or 40p a week. However, using the same resources to raise the child tax credit will give that same family a family tax cut worth 140 a year more, over six times as much: 2.70 a week. So the best way to do most to help low and middle-income families with children, the best family tax cut, is to do as I will do today: to raise the child element of the child tax credit. Over the next three years, I will improve it by 14 per cent. For a family with two children, the child tax credit will be worth up to 88 a week in 2009, or 4,500 a year, a far bigger family tax cut than we could give if we used the same money to improve personal tax allowances or to cut the tax rate. Every one of Britain's 7 million families with children will gain as we raise child benefit on 10 April this year to 17.45 a week.
	Since 1997, we have also recognised that a rising economic tide does not automatically lift all people's living standards, and that over and above securing economic growth, we as a Government have a responsibility to address and cut child poverty. Because of investing in the child tax credit, child poverty has fallen by 700,000 in our first seven years. But we want to do more. It is by raising child benefits, as we have done today, and encouraging more single parents into workas we have also announced todaythat 300,000 children will no longer be growing up in poverty. Instead, they will have better chances.
	It is also our intention that every child born and growing up in Britain is not only freed from poverty but also has assets to their name. Since September 2002, every child born in Britain receives 250for lower income families, 500for their own individual child trust fund, to encourage savings. Today, with 1.5 million accounts already in being, I can announce that for these same children, additional payments of 250 and 500 will be made at the age of seven as well. This is an investment in the future, and in a savings culture among young people, that will in time allow all young people to have more of the choices previously available only to some.
	I understand the very real pressures that mothers and fathers face in affording safe, high-quality child care. In 1997, there was almost no direct help available for child care at all, other than for workplace nurseries. From April, working mothers and fathers can receive help through the child care tax credit worth up to 240 a week or, with the support of their employers, through the employers child care vouchers. That means help is available for working mothers and fathers at every income level, and it is the first time in Britain that we have made an offer of universal help for child care.
	The Childcare and Work and Families Bills will provide new rights to nine months' paid maternity leave and establish a new duty on local authorities to ensure child care places. But today I am also raising the value of the tax-free child care voucher from 50 to 55 a week. I am making capital grants available to medium and small employers to establish workplace nurseries, which will complement the rise from 6 April in the child care tax credit and the expansion of Sure Start children's centres from 700 now to 3,500 by 2010. Overall, that is an increase in child care places for families to 1.2 million90 per cent. more than in 1997.
	I am able to take further decisions on taxation. On insurance premium tax, the aggregates levy, air passenger duty and corporation taxes, I propose that rates remain unchanged. On cigarettes, my decision is, for public health reasons, to go ahead with the annual inflation rise of 9p a packet from tomorrow. I will freeze duty on whisky and all spirits for the ninth successive yearfor whisky, the longest period without an increase for half a century. I will implement, from midnight on Sunday, only the normal annual inflation rise of 4p on wine and 1p on a pint of beer. But in anticipation of World cup success this summer, I am freezing duty on champagne, and on British sparkling wine. I will also freeze duty on cider.
	On VAT, I will continue to help churches and faith groups by refunding VAT paid on renovation of church buildings, monuments and other sacred places. I will extend the special VAT scheme for horse racing. I hold to our pledge not to extend VAT to a number of items: food, books and newspapers, public transport fares, children's clothes and children's shoes, including flip-flops.
	I am publishing today a full updated list of the goods and services now subject to the reduced VAT rate of 5 per cent, and measures to tackle VAT fraud and avoidance. Last year, I proposed that the European Union should raise the duty free allowance for bringing goods into this country from outside the EU. This year, the European Commission has proposed to increase it from 145 to 340, but I am submitting proposals today for a further increase to 1,000.
	The tax-free limit for ISAs will remain 3,000 cash and 7,000 in total. I can report that 190 billion has already been invested by 16 million people. I can confirm as usual the tax-free winter allowance of 200 for pensioners and 300 for the over-80s. Further support for pensioners will be contained within the forthcoming pensions White Paper. I will raise the exemption on stamp duty to 125,000, which means, with the last Budget's measure and this, we have taken 400,000 homeowners out of stamp duty. I will raise the amount of inheritance exempt from tax over the next four years from 275,000 this year to 325,00094 per cent. of estates pay no tax.
	Meeting all our fiscal rules, I have been able this year to cut vehicle excuse duty, continue the freeze on fuel duty, freeze spirits duties, take more people out of stamp duty, extend the family tax cut, child tax credit, and give more employers and employees tax incentives to cut the cost of child care, while at the same time improving tax allowances for business research, development and investment. Because of the strength of our fiscal position, I could cut further taxes while still meeting all my fiscal rules.
	In each Budget, instead of dogmatically imposing a third fiscal rule, I look at the merits of the case to get the balance right between tax, spending and borrowing. Therefore, in doing so, it is also right to consider the case for additional investment in the national interest. I turn to our priorities: finance for our important educational reforms; plans for the Olympics and sports; and, first, defence, law and order and national security.
	This is the first Budget since the attacks and tragedies of 7 July, a day when the nation stood as one against terrorism. We will never forget those who lost their lives and those who were injured. Today, we are allocating funds towards a memorial that will reflect the wishes of the victims' families. We will also support with an initial endowment of 1 million the creation of a new charitable fund to support British citizens injured in or affected by terrorist acts at home and abroad.
	Since 11 September, we have also doubled the budgets for security here at home from 1 billion to 2 billion. The country depends on the strength of our security services and our armed forces. To support our armed forces who serve us so well in Iraq, Afghanistan and other international commitments, I am allocating an additional 800 million. To promote peacekeeping in the most troubled countries of the world, I am today also setting aside an additional 200 million. I can also announce that the UN emergency relief fund, with starting finance of $250 million, will, at the instigation of the Secretary of State for International Development, immediately provide as its first major disbursement $30 million in famine relief to the horn of Africa, building on our own emergency contribution of $60 million.
	To deliver on the promises made at Gleneagles on aid and transparency, to move forward our international finance facility, and as part of the doubling of aid to Africa, I and fellow Finance Ministers from the IMF and World Bank will set out in Mozambique next month a new initiative that will be launched by President Mandelaand we are grateful to himto finance new, detailed 10-year plans so that we can meet the millennium development goal of free schooling for every child by, and if possible before, 2015. Those initiatives are founded on keeping our promises to increase development aid each year to reach 0.7 per cent of national income.
	As the Prime Minister has said, 2006 must also see an ambitious outcome for the world trade round. To ensure that developing countries can both support the round and be beneficiaries of it, we will contribute to an aid-for-trade fund that will help build the infrastructure and capacity to trade in developing countries that are urgently in need of our support.
	The 2012 Olympics will be a proud moment for London and the whole of Britain. Together, the Greater London Authority, the Government and the national lottery have already agreed funding of 3.4 billion. I am able to announce the next stages. We will invest now in our 2012 Olympic champions. Recent results in Melbourneand today, again, in Indiahave shown the outstanding sports talent that exists in our country. For training and facilities for world-class athletes of the future, I can announce 200 million of public money to be matched by raising 100 million in sponsorship, and, with another 300 million from the lottery, over 600 million will be available in total as world-class funding for world-class athletes in our country.
	The Olympics will inspire young people across Britain and we must open up to them new opportunities to take part in sports. So we are also announcing that each year, from now until 2012, there will be a schools Olympics. Starting in Glasgow this year, and in a different city each year, we will fund annual national competitions in Olympic events open to all schoolchildren throughout the United Kingdom.
	The 2012 Olympics is for athletes to excel in, but it must also be an event in which all in Britain can share. Today, we are also announcing an Olympic trust fund for nationwide cultural and sporting events, which will take place alongside the Olympics. The games will end in 2012, but their legacy must continue, and it should benefit not just London but the whole country.
	Because we want the 2012 Olympics and, beyond that, any English bid for the 2018 World cup to regenerate sports across our country, I want us to build in every area over the next decade public-private partnerships that can locally renovate and extend sporting facilities at the grass roots. We are today announcing initial funding of 34 million for a new national sports foundation. It will start next week, modelled on the Football Foundation's success, and will bring together public and private finance for new local sports facilities and grass-roots participation. I am also setting aside 2 million for a new venture between police, premier league football clubs and community groups, with the Football Foundation, to offer young people evening sports and to tackle antisocial behaviour.
	Following the Russell commission which I set up two years ago, the new gap-year and volunteering scheme, youth national community service, will be launched in May with 26 company partners, a budget of up to 150 million and a target of 1 million young volunteers. It will be backed by youth community service on environmental projects, to be financed by an expansion of the landfill tax credit scheme.
	But we must also do more to invest in youth and community facilities, both for the futurewhere banks and building societies have agreed, unclaimed assets will go to finance new facilitiesand from next month, when in each local authority with budgets averaging half a million pounds, young people will for the first time decide on their own local services. I propose that we extend that with a new challenge fund open to all young people proposing innovative projects for youth and community facilities in their areaadditional cash to reward innovation and spread best practice across the country.
	Further to support that and the voluntary sector as a whole, which are at the heart of the life of every community, we will now set up in the Treasury an office for the voluntary sector, including faith as well as non-faith charities. It will advise on gift aid and futurebuilders, and will conduct a nationwide consultation with the voluntary sector to inform our spending decisions.
	But as well as making these additional investments, this Budget will now start the process of setting out our priorities and plans for the next spending round and the years ahead. Our aim must be to ensure by our investment that hard-working families are the beneficiaries of this era of great change. It is right to have the fullest possible debate on spending priorities.
	A decade ago, our first comprehensive review reflected the British people's priorities for education, health and public services. Today I am publishing plans to begin a public debate on our second comprehensive spending review. But there are already two areas in which, by setting out our direction now, we can best deliver our priorities in the future.
	In order to release new resources for our prioritiescentral to which is building world-class schools and educationwe are reviewing the use of assets in all areas. After asset sales reported at 6 billion last year, we plan total sales by 2010 of 30 billion, releasing finance for our front-line priorities. In addition, I can confirm that the sale of Westinghouse will be completed in the next year, and we expect it to raise 3 billion.
	The Government will move ahead in the coming year with the sale of the Tote. To diversify risk further and after the energy review has reported, we are prepared to sell part of our stake in British Energy and related energy assets. We will publish plans for the sale and release of public spectrum. All those decisions will release new money for our priorities for the future.
	Also published today are the figures for the first 6 billion of Gershon savings, including a reduction in civil service posts of 40,000. And I can announce today further savings in the years of the next spending round from 2008 to 2011.
	The Home Secretary has agreed that we can invest more in priorities like policing and security, while making savings in other areas within a three-year budget at its 200708 real-terms level. Her Majesty's Revenue and Customs, the Treasury, the Department for Work and Pensions and the Cabinet Office have also agreed that necessary modernisation will be funded from an innovation fund, and alongside this the spending review for those four Departments will proceed on the basis of minus 5 per cent. a year in real terms below the baseline of 200708efficiency savings that will allow us to focus new and additional resources on front-line priorities.
	To meet and master the global challenge, the most important investment in our economy and our future and the most pivotal reforms we can make will be in the education of our children and young people. I, like so many people, am grateful for the inspirational teachers and the high quality of education from which I benefited. And just as I had the best chances, my aim is that all young people from whatever background have the best of chances.
	There are two priorities where, in this Budget, Britain can speed up our progress and advance even more quickly towards our ambition of world-class standards and excellence. With China and India turning out 4 million graduates a year, we can no longer afford to write off the talent or waste the potential of any British young person. So the Secretary of State for Education and Skills is announcing today that those who have missed out on their first chance in education will have a second chance to make the best of themselves. We are setting aside resources so that, for the first time, up to the age of 25, further education all the way up the scale to A-level standards will be free of charge.
	That new right to free learning will be backed by adult learning grants to help with costs of living. And with financial help also for school leavers who have fallen through the netand whom we want to help make the transition into training and workour aim is a Britain where all young people stay on in part-time or full-time education, and gain skills throughout their working lives.
	But 80 per cent. of the 2015 work force is already in work, and to make a reality of second chances in education for all ages, we must also strengthen our further education collegescentres of learning that have been neglected in the past, but must be at the forefront of future success. So we are announcing for each college a step change in employer involvement, so that we can match the demand for skills to the courses on offer. The Secretary of State is also announcing new powers to redirect resources from failing courses to the best courses, the ones that individuals, employees and employers want to use.
	We will match these further education reforms that promote individual choice, increase local accountability and business engagement and reverse failure with 500 million of capital investment and an annual budget worth 7 billion by 2008. As with other allocations, separate announcements will be made for Scotland, Wales and Northern Ireland.
	But while we have a duty to ensure that there are second chances, we also have to ensure for every child the best first chance. Even with a doubling of investment, Britain's share of national income spent on education is still behind America and other major competitors.
	We know the educational benefits of more individual attention, small group teaching and tuition, and we know that they are easier to get when the overall teacher-pupil ratio is low. In private schools there is one teacher for every nine pupils, compared with one teacher for every 16 in state secondary schools. To secure better results, we have improved the pupil-teacher ratio and doubled the money spent per year for the typical pupil from 2,500 to 5,000.
	But that figure of 5,000 per pupil still stands in marked contrast to average spending per pupil in the private sector of 8,000 per year. Our long-term aim should be to ensure for 100 per cent. of our children the educational support now available to just 10 per cent.
	So to improve pupil-teacher ratios and the quality of our education, we should set as an objective for our country that stage by stage, adjusting for inflation, we raise average investment per pupil to today's private school level. And I can start immediately in the coming spending round by closing today's gap between capital investment for pupils in private schools and in state schools, so that all schools and all pupils have world-class IT and world-class equipment, teaching materials and buildings. So in the coming five years, investment in schools will rise from 5.6 billion a year to reach 8 billion a yeara 50 per cent. rise, making a total of 34 billion of new investment over five years.
	By 2011, annual investment in the typical child's education will be over 1,000 per pupil, matching in state schoolsin IT, equipment and buildingswhat private schools spend today, and demonstrating, fully within the discipline of our fiscal rules, that by investing more in education and investing not a lower share of our national income but a higher share, we can make a practical reality of our goal that every child should have the best possible start in life. It is a goal we could not achieve if bound by a fiscal rule that cut investment, but a goal we can achieve if we build a national consensus around a rising share of investment in education.
	I have further announcements to make. This Budget's choice is to invest more, not less, in schools and families; to strengthen the new deal, not abolish it; to maintain the climate change levy, not remove it; and instead of cutting investment, to hold firm and not waver on the principles that have given Britain stability and jobs, and now allow us to do even more for our priorities.
	To tackle crime and the fear of crime, there are already a record 140,000 police officers and 6,000 community support officers. In 1,000 neighbourhoods, there are full community policing teams. But the Home Secretary and I want every community to have a community policing team as soon as possible. So, at an additional cost of 100 million, we will ensure by April next year that we more than double the number of community support officers from 6,000 to 16,000, and ensure that there will be neighbourhood policing in every community in England and Wales.
	From 1 April there will be free local bus travel for every pensioner and for disabled people, but we believe that there should also be free national bus travel. So the Transport Secretary is announcing today, from April 2008, at a cost of 250 million, for every pensioner and for disabled people free off-peak national bus travel in every area of the country.
	I have one further announcement. In 1997, there was no payment at all direct to primary and secondary head teachers. With 270 million extra from April, rising to 440 million next year, I can today put much more money than before direct to our schools for tuition, teachers and teaching support. There are those who sayas with the 1.5 billion that I have already found for law and order, policing, security, environment and the Olympicsthat this 440 million for education should be used to cut taxes. I could, of course, afford to do so, but I say: investing in education comes first, and investing in education is this Budget's choice. So for the typical primary school, up from this year's 31,000, 44,000 will go direct to the head teacher. For the typical secondary school, up from this year's 98,000, from next week 150,000, and next year 190,000twice what it is now. For the largest secondary schools with the greatest needs, from 260,000 to 365,000 next week, rising to 500,000 next April. Next year, 440 million more will go direct to schools, helping pay since 1997 for 30,000 more teachers.
	Excellence in education, my priority; more investment and reform, not less; a strong and strengthening economy; this is a Budget for Britain's future and I commend it to the House.

PROVISIONAL COLLECTION OF TAXES

Motion made, and Question,
	That pursuant to section 5 of the Provisional Collection of Taxes Act 1968, provisional statutory effect shall be given to the following motions:
	(a) Rates of tobacco products duty (motion No. 2)
	(b) Rate of duty on Beer (motion No. 3)
	(c) Rates of duty on wine and made-wine (motion No. 4)
	(d) Vehicle excise duty (rates) (motion No. 8)
	(e) Stamp duty land tax (unit trust schemes) (motion No. 61)[Mr. Gordon Brown.]
	put forthwith, pursuant to Standing Order No. 51 (Ways and means motions), and agreed to.

Mr. Deputy Speaker: I now call on the Chancellor of the Exchequer to move the motion entitled Amendment of the law. It is on that motion that the debate will take place today and on the succeeding days. The remaining motions will not be put until the end of the Budget debate, next week; they will then be decided, without debate.

Budget Resolutions
	  
	AMENDMENT OF THE LAW

Motion made, and Question proposed,
	(1) That it is expedient to amend the law with respect to the National Debt and the public revenue and to make further provision in connection with finance.
	(2) This Resolution does not extend to the making of any amendment with respect to value added tax so as to provide
	(a)   for zero-rating or exempting a supply, acquisition orimportation;
	  (b)   for refunding and amount of tax;
	  (c)   for any relief, other than a relief that
	  (i)   so far as it is applicable to goods, applies to goods ofevery description, and
	  (ii)   so far as it is applicable to services, applies to servicesof every description[Mr. Gordon Brown.]

David Cameron: Well, we wondered today whether we would get a Budget or a leadership bid, and I have to say that we did not get much of either. One can tell how big the crisis in the health service isthe health service did not even get a mention. If we cut through all the rhetoric, what we have is a Chancellor who has taxed too much, borrowed too much and is the roadblock to reform. He is a politician completely stuck in the past.
	Of course, there are some things in the Budget that we welcomenot least because we proposed them. I particularly welcome what the Chancellor had to say about independent statistics and youth volunteering. We will look carefully at the detail, but I like what is happening: I come up with the ideas and he puts them in his Budget. [Interruption.] Bye-bye.
	The Chancellor made a lot of the changes to the climate change levy, but he still has not addressed the real problem: it is a tax on energy, not a charge on carbon, which is why carbon emissions keep going up.
	The Chancellor has just announced a new environment institute, but this is the same Chancellor who is closing the very laboratories that do the research into climate change. This was not a genuinely green Budget, and that is not surprising, because this Chancellor has not made a single major speech on the environment in 11 years. In a carbon-conscious world, we have got a fossil-fuel Chancellor.
	I congratulate the Chancellor on what he had to say about the Olympics. I do not want to overdo it, however, as he has just spent an hour congratulating himself.
	The Chancellor told us that his borrowing forecasts were correct. Yes, he correctly forecast that the public finances are in a mess. He is borrowing 37 billion this year. He told us that his economic growth forecasts were correct. Yes, he correctly forecast that Britain would grow more slowly than the United States, Canada, the G7, Spain, Ireland, the countries of the Organisation for Economic Co-operation and Development, and Australia. [Interruption.] I know that the Chancellor and the Prime Minister get to talk to each other only once a year, on Budget day, but they ought to listen to this bit.
	We will study the rest of the Budget carefully because, after 10 Budgets, we know that this Chancellor's Budget speeches bear very little relation to the Budget itself. He told us about the savings culture, but why did he not tell us that according to page 238 of the Red Bookor, in the Prime Minister's case, the unread bookthe savings ratio is only 5.75 per cent.? That is half what it was when he took office. Why did he not tell us that business investment, at 9 per cent., is at a record low? And he did not tell us that today he has revised the figure downward compared with three months ago. [Interruption.]
	Mr. Deputy Speaker, there are two central facts that tell us the real story of this Budget. [Interruption.] First

Mr. Deputy Speaker: Order. I am sorry to interrupt the right hon. Gentleman. The Chancellor was listened to with very[Interruption.] Order. The hon. Member for Glasgow, North-West (John Robertson) will be removed if he behaves like that. One expects a certain reaction to these things, but the Chancellor was heard in relative silence and the same courtesy should be offered to the Leader of the Opposition and to the leader of the Liberal Democrats afterward.

David Cameron: There are two central facts that tell the story of this Budget. First, the tax burden is at its highest ever level in the history of this country: higher than when Denis Healey made the pips squeak; higher than when Ramsey MacDonald sat where the Prime Minister is sitting now.
	People who listened to the Budget will have noticed the second fact: even with the highest tax burden in Britain's history, the Government are borrowing 175 billion over the next six years. I know that the Chancellor is a man in a hurry, but that is no excuse for belting out figures like a supercharged bookmaker. Let me go through the figures in turn. He is going to borrow 37 billion this year, then 36 billion, then 30 billion, then 25 billion, then 24 billion, then 23 billion. That is 175 billion over six years. This Chancellor is mortgaging this country's future. That is more than 6,000 of debt for every household in this country. Those are the facts. After all the years of spin about enterprise and prudence, we have finally got to the truth. He is an old-fashioned, tax-and-spend Chancellor, and that approach is completely out of date. The story of this week is of a Prime Minister and a Chancellor up to their necks in debt, making promises that they cannot keep and not knowing whether to work together or fight with each other as the ship starts going down.
	The real challenge facing this country is competing in the new global economy. The Chancellor has given us the biggest tax burden in Britain's history, and cannot be the right person to meet that challenge. We used to have the 10th lowest business taxes in the developed world, but we now have the 10th highest. The Chancellor has had 10 Budgets to boost science, but science departments in our universities are closing. He has had 10 Budgets to improve transport, and some of our motorways look like car parks. He cannot be the change that this country needs, because he is the architect of the policies that have put us where we are.
	This country also faces a huge challenge to reform public services. The Chancellor, who has squandered billions of pounds on unreformed public services, cannot be the right person to meet that challenge. He has doubled spending on the health service but this weekend one hospital sacked almost 1,000 staff. Deficits across the NHS have now reached 1 billion. The Chancellor has doubled spending on education, but more than half of our children leave school without attaining the required standard.
	Billions of pounds have been raised and spent, but we have no idea where the money has gone. With a record like that, the Chancellor should be running for treasurer of the Labour party.
	In his Budget, the Chancellor mentioned pensions. After everything that he has done, millions of people in this country will think that he has got a nerve. This is the Chancellor who took 5 billion out of the nation's pension funds, and whose means testing destroyed savings. No mention was made of whether his pre-election bribe of 200 would be continued: I expect that we will have to find that in the Red Book.
	This is the Chancellor who caused the right hon. Member for Birkenhead (Mr. Field)the Government's first pensions Minister, and the only one who was any goodto say:
	When Labour came to power we had one of the strongest pension provisions in Europe and now . . . we have some of the weakest.
	The Chancellor who smashed up the pension system cannot be the right person to rebuild it.
	Labour MPs may think that the Chancellor is their salvation from the mess that they find themselves in this week, but the big policy failures of this Governmentas opposed to the sleaze and the spinare his failures. The failure to spend money wisely, to reform public services, to protect people's pensions, and to prepare for Britain's futurethose failures are made in Nos. 10 and 11 Downing street.
	The Chancellor may see himself as the rock on which Labour can rebuild its church. Instead, he is the roadblock stopping Britain from meeting the challenges of the future. He is an analogue politician in a digital age. He is the past. [Interruption.]

Menzies Campbell: It is a fearsome task to follow such a constructive contribution as the one we have just heard, but I must begin by congratulating the Chancellor on the presentation of his 10th Budget. That he did so with great enthusiasm is hardly surprising, as he has a particular affinity for the number 10.
	Let us look at the Chancellor's legacy. Levels of inequality are worse than under Mrs. Thatcher. Our pensions system is in crisis, and consumer debt is at 1 trillion. In spite of what the right hon. Gentleman has said today, there is complacency about the threat to the environment, and he presides over a Treasury that cannot manage even its own tax credit system.
	Of course we welcome the changes in child tax credit and acknowledge the stability in inflation and employment, but we are entitled to remind the Chancellor that that stability is based on the independence of the Bank of England. The right hon. Gentleman derided that policy throughout the 1997 general election campaign, but he implemented it within 48 hours of entering the Treasury. Against that background, there is no room for complacency or time to tread water.
	I return to the issue of inequality, to which our mutual friend John Smith would have attached the highest priority. The wealthiest 1 per cent. in this country owns 23 per cent. of the assetsmore than in 1997while the poorest 50 per cent. own only 6 per cent.less than in 1997. The top 20 per cent. of earners pay less of their income in tax than the bottom 20 per cent., while the tax system remains unfair and complicated.
	Why does the Treasury tinker with a tax system that is so fundamentally unfair and requires such radical reform? Every time that it does so, it adds layer upon layer of complexity and creates an incitement to, and opportunity for, fraud.
	The most unfair and regressive tax of all remains the council tax. Having read the Red Book, we can confirm that it contains no provision for the 200 rebate made available last year. If there is to be no council tax rebate, we know that some of the most vulnerable will suffer. They will ask why they deserved help immediately before a general election, but not a year later.
	The lack of reform to the council tax is not the Chancellor's only failure to act. Under this Government, green taxes have fallen as a share of overall taxation. The measures announced today will make little impact on that. If the Chancellor needs any external reference, he need only examine yesterday's report from the Environmental Audit Committee.
	We need simplicity in environmental taxation, and a proper system of green economic incentives that encourages people to change their habits and the way that they live. Such a system should express and implement the principle that the polluter should pay. It was notable that, in the course of his observations about the environment, the Chancellor made no reference to the impact made by aviation, nor to the crying need to address the problems of continued expansion in the aviation industry.
	The fact is that CO 2 emissions are higher now than in 1997. The additional vehicle excise duty to be paid by drivers of 4x4 vehicles applies only to new vehicles. By my reckoning, it is rather less than the cost of half filling the petrol tank. That is hardly likely to operate as a disincentive for people sufficiently well off economically to be able to afford such vehicles.
	As for public spending, the Chancellor prepared the ground well in his pre-Budget report. He conceded the error in his growth predictions, changed the economic cycle, pointed out that he was going to raise taxes and acknowledged the slowdown in public spending. He got a lot of cheers today when his speech seemed to foreshadow increases in public expenditure. What many of those who cheered did not realise is that the spending plans pencilled into the pre-Budget report will mean that there will be announcements of real-terms cuts in many Government Departments next year.
	Despite all the extra investment, public spending is still not reaching the front line. Treasury targets have led to NHS trusts, and to the drive to reduce waiting lists at all costs that has meant that care in other areas has been cut.
	Of course, tough choices have to be made and spending prioritised. For example, the industrial subsidies that the DTI has been giving to the nuclear power industry could be cut, and the money going to what is colloquially described as the baby bond schemeon which the Chancellor enlarged todaywould be much better spent on early-years education now than on a bond in the future. In addition, the right hon. Gentleman could decide not to proceed with spending millions and perhaps billions of pounds on an identity card scheme that is unnecessary and unworkable.
	The British people want better public services and are willing to pay for them. What they do not understand is how so much can have been spent with so little to show for it. Operations have been cancelled, wards closed, local hospitals threatened and nurses have even been made redundant.
	It is clear that trust in fiscal policy must be restored. That could have been achieved by widening the remit of the National Audit Office so that it can provide transparent and independent scrutiny of all Budget assumptions and forecasts. Some progress has been made today in respect of statistics, but that is not enough. The Chancellor has a good record of listening to our advice, rejecting it, and then accepting it. Perhaps, on this occasion, we will once again prevail.
	I welcome what the Chancellor said about housing and the shared equity fund. The question is whether any of that represents new money. We have to address the issue of those who simply cannot afford to make the contribution that is necessary to participate in a shared equity purchase of a house.
	I declare a retrospective interest in the Chancellor's provisions for the Olympic games. It is essential that those games are a success for London and the whole of the United Kingdom. He will have universal support for what he announced in that regard. However, it is not true to say, as has been rumoured, that my hon. Friend the Member for Falmouth and Camborne (Julia Goldsworthy) is already positioning herself to make a bid for the British team.
	One issue that the Chancellor said nothing at all about was that of personal debt. Consumer debt is now approaching 1.2 trillionpractically identical to the gross domestic product of the United Kingdom as a whole. Of course, consumer debt has underpinned the economic boom, but the legacy for many families will be disaster. Nearly a fifth of all income is being used to service debt. That means that it is back to the level that it was at when the economy crashed under the Conservatives in the early 1990s. The immediate signs of that stress are clear: rising bankruptcies and rising repossessions.
	The other side of that is the poor recent record of private business investment. Under its current leadership, the CBI has been a great deal more supportive of the Government than in previous years, but I suspect that it will react to this Budget more in sadness than in angersadness at the way in which regulation and tax complexity are squeezing British business. The Budget does nothing to deal with that. Enlightened British companies understand the need to pay taxes for investment in education and infrastructure; what they do not understand is why those taxes do not deliver the goods.
	The Budget failed to deal with the most glaring issue before us today: the crisis in pensions. Last week we learnedthe Leader of the Opposition already referred to thisthat the Government would not follow the ombudsman's recommendations and compensate those who were foolish enough to believe in Government information. The ombudsman said that the Government had provided information that was
	inaccurate, incomplete, unclear and inconsistent
	if I may jog the Chancellor's memory. If an independent report had made a similar judgment about the actions of the Tory Government when the Chancellor was in opposition, his wrath would have been wondrous to behold.
	We know that there is a broad consensus of agreement around the recent report by Adair Turner and that there is an existing blueprint for pensions reform that is available and capable of implementation. It seems that it is only the Treasury that stands in the way. Of course, chairmen of commissions cannot expect automatic acceptance, but Adair Turner is entitled to a real sense of grievance. The problem of pensions is set to get worse as the demographic balance of this country changes.
	The Budget was an opportunity. In a period of relative stability, with low inflation and stable employment, the Chancellor had an opportunity to show his worth. He could have tackled the unfair tax system; he could have made the environment a priority; he could have faced up to the pensions crisis; and he could have addressed the problem of personal debt. He has declined to do any of those things. This a legacy from which it will be difficult for him to escape. [Interruption.]

Madam Deputy Speaker: Order. Will Members who are leaving the Chamber please do so as quickly and quietly as possible?

John McFall: It is a pleasure to contribute to the debate. I congratulate the Chancellor on his 10th Budget. He spoke for about 60 minutes and enlightened us. Sadly, the Leader of the Opposition spoke for eight minutes, so he has an awful long way to go to give us an insight into what the Conservative party's thinking is on the economy. It must be the shortest speech on record. I think that that is rather disgraceful and a discourtesy to the House.
	In 1997, The Times described the Chancellor's first Budget as a
	common sense budget that deserves support.
	We can echo that today, 10 years later. I note that he broke with tradition then. He held his Budget on a Wednesday and eschewed the traditional right of a Chancellor to drink Scotch whisky when he presented it. Instead, he favoured Scottish mineral water. I congratulate him, though, on being consistent on Scotch whisky and having a freeze on duty for all these years. That is good news for constituents in my area, where we have whisky plants. I also note that the FTSE 100 was 4,751 on the day of the Chancellor's first Budget and is now 5,985. That underlines a decade of economic prosperity and stability.
	I also note that the Chancellor described 2005 as being the toughest year of his chancellorship, with the virtual doubling of oil and commodity prices, as well as a slow-down in the UK's main export market, which is Europe, and the country having to adjust to a more sustainable house price growth in the UK housing sector.

Charles Walker: Is the right hon. Gentleman aware that since 1997, our stock market has been one of the worst performing stock markets of any major industrialised nation in the western world? Does he think that the Chancellor should take some responsibility for that?

John McFall: Only in the past week or two, I had the opportunity to have meetings with people from the London stock exchange and such comments never passed their lips. In fact, they said that they are on a high, that equities are good and that they are looking forward to keeping themselves independent and not having NASDAQ or Macquarie coming in. The vibrations from the City are very good. I suggest that the hon. Gentleman follows my example, goes to the City, speaks to people and gets an understanding of what the City is about.

Ian Austin: In addition to the Leader of the Opposition's speech being the shortest that any of us can remember, does my right hon. Friend agree that it was also the most feeble, because it failed at any point to respond to any of the measures that the Chancellor had outlined?

John McFall: I would not want to be discourteous to the right hon. Member for Witney (Mr. Cameron), but what I can say is that I was left bemused about the future direction of the Conservative party on economic policy. We all found that. It is about time that the Conservatives came up to the plate and explained to us what their actual policies are. As one politician said in American, where is the meat? That is what we are looking for.
	I welcome the investment in education that the Chancellor announced today. I did not hear about this from the official Opposition, but the fact that we have an ambition to match spending in public schools with that in private schools must be a good thing. I hope that they go back and, in their clubs and social events, mention that the country has made a great innovative move. There are other people in society who will benefit from their education in the same way as they have done. I can only commend that move by the Chancellor.
	I also commend the extra investment in science and infrastructure. I speak as a former science teacher and I know that, as someone from a science and engineering background, I am in a minority in the House. If we are to tackle the competitive issues that face the country, which the Chancellor has outlined, we need to ensure that we increase the number of science and engineering graduates in this country. We should be mindful of the fact that the Chancellor said that China is producing 4 million graduates.

Brooks Newmark: I would be interested to know what the right hon. Gentleman feels about the Government not supporting Sussex university, which is to close its five-star chemistry department.

John McFall: It is a matter for universities to decide what they do and on what particular issues they focus. What I would be concerned about is if the country as a wholeUK plcwas not facing up to and addressing the national shortage of science and engineering graduates. We must focus on the big picture.
	As well as the science infrastructure, I welcome the investment in the Olympics, as the right hon. and learned Member for North-East Fife (Sir Menzies Campbell) mentioned. It is important to give our young people opportunities and ambitions. That investment, as well as the investment in child tax credits and child trust funds, can only be well used. Inculcating the savings habit in young people is increasingly important, and ensuring that those on lower incomes enjoy being involved in the savings environment is also extremely important.

Graham Stuart: Does the right hon. Gentleman agree that as the Chancellor of the Exchequer inherited the strongest economy in Europe, he should have been in a position to deliver the first target for the reduction in child poverty by 200405? Does he join me in decrying the fact that hundreds of thousands of children remain in poverty when the Government had the means and stated the aim of doing away with it?

John McFall: I am aware that in 1997 the Labour Government inherited an unemployment rate of 3 million. Since 1997, we have produced 2 million jobs, and that is the best antidote to poverty. I speak as an ex-school teacher, as I mentioned earlier, and one of the sad features of life when I was teaching in the 1970s and 1980s was meeting young people five or 10 years after they had left school who had yet to get a job. If people do not have a job, they are not fulfilled and they do not contribute to societyit is a spiral of decline. It is important to provide jobs, and I commend the Government on those extra 2 million jobs.
	This was the first Government with the stated aim of reducing child poverty. The Chancellor mentioned the 700,000 who had been lifted out of poverty, and that can only be a good thing. Is there a bigger hill to climb? Of course there is, and I would like to think that we could all tackle it together.

Andrew Smith: Would not comments from the Opposition about child poverty have greater credibility if they would make the pledge to eradicate child poverty in a generation and match our commitment to help the poorest families out of poverty? Is not the reason they do not do that because under their third fiscal rule they would not make the spending available to conquer poverty?

John McFall: I agree that if we could achieve our aims and ambitions on a consensual basis it would be good. The Leader of the Opposition has still to flesh out his economic policy, and that is one suggestion that he could take on board.

Edward Balls: Perhaps we should be more understanding of the Leader of the Opposition's position. He has asked the right hon. Member for Wokingham (Mr. Redwood) to discover his economic policies for him over the next two years. Until the right hon. Gentleman has come up with the plan, it will be hard for the Leader of the Opposition to respond to any Budget. However, the third fiscal rule will make it very hard for the Conservatives to match our pledge on education spending. If they intend to cut spending as a percentage of GDP, it will result in lower spending on science and education.

John McFall: I look forward to the recommendations that the right hon. Member for Wokingham (Mr. Redwood) produces, because to use skiing terminology, he is exciting and he goes off piste a lot. I am sure that we may look forward to some innovative suggestions in the future.
	The Treasury Committee is considering savings issues at present and recently examined the issue of tax credits. Tax credits are a good scheme, but they must be delivered in practice. My right hon. Friend the Member for Birkenhead (Mr. Field) gave evidence to the Committee and I know that my right hon. Friend the Paymaster General has read the transcript, but it is worth underlining what he said. I suggest that trying to modify the tax credit system runs the danger of it starting to perform like the Child Support Agency. The choice is between a flexible system or a fixed award. As my right hon. Friend the Member for Birkenhead pointed out, if we change to the fixed award, Members of Parliament will be inundated with complaints about the unfairness of a scheme that does not quickly take into account changed circumstances. I suggest that my right hon. Friend the Paymaster General stays the course.
	The Committee visited Preston to examine the IT in the tax credit office. From our experience and that of our constituents, we know that not all the information is on the computers when they telephone that office. The IT system is in much need of repair, so I hope that my right hon. Friend takes up the comments made by the Committee on that point.
	The Committee is also holding a short inquiry on the Turner report and the pension recommendations. It will be short because we want to be able to publish our report before the White Paper is produced. Our focus will be on the design of the national pension savings scheme and the role of financial services regulation.

Nicholas Winterton: I am delighted that the right hon. Gentleman has raised, openly and transparently, the matter of pensions. Would he comment on the tens of thousands of people in occupational pension schemes who have lost their pensions, especially since the Chancellor took more than 5 billion a year from them, from his first Budget onwards, by the changes to advance corporation tax? Does the right hon. Gentleman think that it would have been a good investment, among the Chancellor's largesse today, to allow those people to benefit from the findings of the parliamentary ombudsman, Mrs. Abraham, in their favour, due to maladministration by the Government?

John McFall: The hon. Gentleman has conflated two issues. On the first issue, I believe that some 85,000 workers are involved, including some of my constituency. One can have nothing but real sorrow for their plight. However, when it comes to macro- economic issues and Government commitments on public expenditure, it is evident that neither the Government nor the Opposition are willing to make a proposal. My right hon. Friend the Prime Minister asked last week whether the taxpayer should pick up the bill for those schemes. I accept that point, but I hope that discussions will continue because it was only yesterday that many of those affected came to lobby us on that issue.

Jo Swinson: Does the right hon. Gentleman share my disappointment that pensioner poverty was largely ignored in the Budget? In particular, the opportunity was lost to introduce a decent state pension for all pensioners. Many of those eligible do not claim the means-tested pension credit, so should not the proposals by Adair Turner be implemented instead?

John McFall: The hon. Lady and I share a constituency boundary: she represents East Dunbartonshire and I represent West Dunbartonshire

Rob Marris: West is best.

John McFall: That may be so, but the hon. Lady's constituency is more affluent than mine. Irrespective of where I go in my constituency, including social clubs for pensioners, people are grateful for the pension credit that the Government have introduced. There is now much more money in pensioners' pockets. If the hon. Lady is suggesting that there is a case for examining the position in the medium and long term, I agree, but a short-term solution has been found to pensioner poverty. We may have to embrace the medium and long-term issues in the pension report.

Julia Goldsworthy: Does the right hon. Gentleman agree that 1.7 million pensioners who are entitled to pension credit do not receive it and that that is a scandal that needs urgent attention?

John McFall: I recommend that the hon. Lady does what I and several other hon. Members have done. In conjunction with the Pension Service, we have held meetings in our constituencies to encourage people to apply for the pension credit. The Department for Work and Pensions has been very helpful to me and other hon. Members in organising such open days.
	The Turner commission report raised two or three other important issues, including industry regulation. We know that the industry's commission-based model has produced inherent conflicts of interest that successive Governments have used regulation to manage. The mis-selling scandals led to tighter regulation, which, while protecting some consumers, has increased distribution costs and made it uneconomic for the long-term savings industry to service consumers on below-average incomes. Embracing the needs of lower-income consumers is one of the issues with which Turner, the Government and others will have to grapple. As Turner pointed out,
	it is very difficult for the financial services industry to sell pensions to people of average earnings and below, working for small and medium size companies, or even to sell pension schemes to their employers, at annual management charges sufficiently high enough for them to make a profit but sufficiently low enough to represent good value for money for the person saving.
	That highlights the need for two solutions: first, the Government need to make the pension system simpler, to reduce the cost of regulated advice; and secondly, the industry needs to develop and encourage the take-up of simple, low-cost stakeholder products for that larger market.
	The Financial Services Authority has a role in that regard. It did not go as far as it could on simpler regulation for stakeholder productswe have to get regulation right before we start considering the management costs, which must be low. Turner recommended 0.3 per cent. and at the weekend Aviva became the first insurance company to propose a figure, which was 0.6 per cent. However, we should be striving to reach Turner's figure.
	The fiscal policy framework has stood the test of time. The Chancellor mentioned that the golden rule had been met, but the Treasury Committee and the International Monetary Fund consider that current fiscal rules may need strengthening towards the end of an economic cycle, to reinforce the credibility of the framework. The Committee will reconsider that issue over the next few months.
	Some of the challenges to the framework will come in   the form of the spending pressures to which theGovernment will have to respond in the 2007 comprehensive spending review. Their capacity to do so successfully will be enhanced if their preparations are transparent and Members and Select Committees can both examine and contribute to the process, so I welcome the announcement about independence for the Office for National Statistics. I received a letter about the proposals from my hon. Friend the Financial Secretary to the Treasury, which stated that the Government are
	entrenching independence in legislation . . . introducing direct reporting and accountability to Parliament, rather than through Ministers.
	So I presume that it will be through the Treasury Committee. The letter noted that the Government were
	placing a statutory responsibility on a new independent governing board to assess and approve all National Statistics against the code of practice, also backed by statute
	and
	making key appointments to the board through open and fair competition.
	As the Minister knows, an open and fair appointments system is important. Next year will be the 10th anniversary of the establishment of the Monetary Policy Committee, which may be a good time look at openness and transparency in appointments to such bodies. Given our experience of the work of the MPC over the past 10 years, I want Ministers to anticipate issues and problems, so that if they come up in Parliament the appointments system can be seen to be open and fair.
	It is important that statistics services are seen to be independent. In February, a MORI survey of public opinion on statistics for the Statistics Commission found that there was
	little consensus on whether the statistical service is subject to undue influence from the Government. Many, in particular those with a connection to Parliament, are confident that the statistical service operates independently and with integrity.
	I am sure that we would find that view in the Housebut it is not the House that matters, it is the outside world. The survey continued:
	However, for those outside the 'Westminster sphere of influence', there is far more scepticism as to whether this is actually the case. While most still regard the ONS as an authoritative, trusted source of information, there are doubts over the validity of figures produced by individual Government departments.
	As the Finance Bill goes through the House, it is important that Ministers take account of that point, which will also be of interest to Members in Committee.
	The Chancellor was correct to stress the measures weneed to adopt to enhance the UK's global competitiveness. That is welcome, not least for women. The women and work commission produced a report in February, Shaping a Fairer Future, which set out 40 practical recommendations to tackle job segregation and the gender pay gap, which still exists despite 30 years of equal pay legislation. The only way that we will respond to global challenges on competitiveness is to ensure that we upgrade our skills, so I welcome the continuation of the new deal and the upgrading of skills, especially for women in low-paid employment.
	The Treasury Committee has been seized by what globalisation will mean for the UK. We have undertaken an inquiry into globalisation, to which both the Governor of the Bank of England and the Chancellor have agreed to give evidence. Part of our inquiry will look at the role of the IMF. The Chancellor and the Governorin a speech a month or so backhave both focused on the IMF, about which there are a number of fundamental questions.
	What is the fund for? Do we need an IMF? Is there a role for a multilateral monetary system and, if so, what is it? In 1946, the international monetary system was built around fixed exchange rates and controls on capital investment, and each country met its international responsibilities by running a balanced current account. That is a world away from the situation faced by financial services in the 21st century. The IMF is increasingly seen as the lender of last resort, and until the repayment of loans by Argentina and Brazil, 70 per cent. of its outstanding loans were to only three countries. The IMF lending book is the lowest that it has ever been, and we can be sure that the Asian economies, including Japan, having built up their foreign exchange reserves, will not be coming back to the IMF. They were scarred by the experience of the 1990s.
	The IMF has a number of tasks, especially at a time of such massive global imbalances. It should be a forum for transparent discussion of the way forward with national Governments about risks to the world economy. Recently, the Treasury Committee visited the United States where we had the opportunity to talk to a wide number of people. One issue relating to economic risk is trade protectionism, and the possibility of its being translated into policy change in the US should not be dismissed. It is a risk and a Bill proposing further protectionism is currently before Congress. However, it is important that we emphasise to our US colleagues that protectionism will not get us anywhere.
	There is also a risk of sharp adjustments in US current accounts spilling over to sharp adjustments in assets, markets and energy prices. The high and volatile energy market remains a concern in a globalised world where new alliances are being formed in the global economy.
	A new world order has been established, as people have indicated, and the US economic hegemony is being challenged by the rise of the new economic superpowers, so an understanding of global economic development no longer needs to begin in Washingtonhence the Treasury Committee in its inquiry has already visited China and, in June, hopes to visit India, which has been labelled the new China. I will not go over all the statistics on Chinamost hon. Members are familiar with thembut the UK needs policy responses to them.
	The Government have indicated that they have a UK-China task force and have identified five key issues, with which I agreeenergy, financial services, water, health care and information and communications technologybut I suggest to Ministers that we should also take on board both education and legal services. On a visit to Hong Kong in September, at the invitation of the Hong Kong Government, it was obvious that there are opportunities in education and legal services, and Hong Kong is a good base for us to be involved in that exercise.
	We have globalisation at a time of threats in the US and in Europe. We saw the almost xenophobic response by people in France and Belgium to the possible takeover of the steelmaker Areclor by Mr. Mittal. We saw the US reaction to the PO takeover by Dubai Ports World. Only in the past couple of weeks, we have seen the locking out of an Italian energy company by the French, who designated 11 sensitive sectors that must be safeguarded against foreign bids.
	We must avoid a perilous collision between nationalism and globalisation. Therefore, it is very important to have a cross-party view on the issue so that we can respond to the long-term challenges, which have a habit of coming sooner than we expect. The Chancellor is right to focus on those long-term challenges, but we also have short-term challenges, on which the Treasury Committee will, no doubt, examine the Chancellor. Over two and half hours, all of us who serve on the Committee will have an opportunity to pinpoint those issues.

Nicholas Winterton: The right hon. Gentleman is the Chairman of a very important Select Committee and he has just referred to international business takeovers. Does he think that the people and Governments of countries must take a view on globalisation and decide whether every takeover will be beneficial? Does he agree that they should consider not only the long-term survival of the company in question, but the impact on employment in the communities where the companies are being taken over and the benefits or disbenefits that the takeover might bring to those localities and countries? That is not just nationalism, it is good sense.

John McFall: I agree with the hon. Gentleman. At the end of the day, globalisation has been a good thing. For example, consumers have found that electrical goods and clothing have been cheaper as a result. US consumers have been able to spend because China and other Asian countries are holding the dollar as their foreign exchange reserves. There are good aspects to globalisation, but there are drawbacks as well. Increasingly over the years, some of our communities will be affected by them.
	Do we have a policy response to the trends that will take place in the future? It is important to have such a debate now. The Treasury Committee is looking at the issue now and we share our information with the House. There is no doubt that a number of us will experience the local effect of the downsides of globalisation, but I am sure that we can debate that as time goes on and consider those issues with a common view, so that we find both an understanding of what is happening in the world and an appropriate policy response for our country, which will help both its competitiveness and prosperity in the future.

John Redwood: I have declared my interests in the Register of Members' Interests, and I should like to remind the House that I am a director of companies in both services and manufacturing and I am a director of a pension trustee company of one of those companies.
	It is a great pity that the Chancellor of the Exchequer presents his case in such a selective way. I certainly welcome in his remarks today the proposition that we should have a independent eye cast over how the figures are compiled, and I hope that that independent eye will also be able to give advice to the Chancellor, which we can know about, on how the figures should be presented on big occasions such as this. It makes for a much better debate if we have an honest and full account of what is going on in the economy. For our part, we can accept that not everything is bad, but we would like the Chancellor to agree that not everything is good.
	It is extremely good that we are debating the economy yet again against the background of continuous months, quarters and years of output growth, since we righted the economy after the bad mistake of the exchange rate mechanisma policy recommended by Labour to the then Conservative Government, but a policy that Labour seems to have forgotten that it was part father and mother to. Since we came out of that most unfortunate experiment and since the Conservative Government put in place the foundations of fiscal discipline and greater productivity growth, the economy has grown extremely well. The continuous growth under Governments of both parties is extremely welcome.
	If we look at the Chancellor's views on growth, we must acceptI trust that Labour Members will acceptthat we are reviewing a disappointing year. In 2005, the Chancellor tells us that output growth was down to only 1.75 per cent., compared with, as he helpfully tells us, real GDP growth that averages 2.5 per cent. in the major seven countries and 4.5 per cent. in the world overall. So that shows Britain growing not only at under half the world average rate, but at considerably below the growth rate of large, advanced countries.
	If we turn to the Chancellor's forecasts, we see that he thinks that the economy will grow by between 2 and 2.5 per cent. this year. If we are charitable and say that he thinks that it will grow at 2.25 per cent.I fear that he thinks that it will grow at 2 per cent.that compares again with what he thinks will be a rather better performance by the major seven countries, with growth at an average of 2.5 per cent., and an overall world performance of 4.5 per cent. yet again.
	The first question that we need to ask in reviewing the Budget measures is whether the Chancellor is now planning to put in place measures that are sufficient to get Britain at least up to the average growth rate of the major countries in the world, or even better, to get us above the average of the major countries of the world, because we have clearly slipped some way below them in recent months and recent quarters.
	The Chancellor also gives us the latest projections on his borrowing. The Leader of the Opposition, my right hon. Friend the Member for Witney (Mr. Cameron) gave a superb response to the Budget, and its brevity was matched by its brilliance. There is no need for the Leader of the Opposition to give a very long speech if he has gone to the trouble of preparing an excellent short speech that makes all the crucial points. One of the crucial points on which my right hon. Friend immediately homed in, although he did not have very long to read the documents, was the way in which the Chancellor intends to borrow so much money over the review period set out in the Budget forecast that we have just received.
	My right hon. Friend said that the Chancellor plans to borrow 175 billion, on the published figures, through the public sector accounts over that period. Like my right hon. Friend, I think that that is very dangerous. If we are going to live through a period of reasonable growth, surely that is exactly the point in the cycle where we should cut public borrowing rather more sharply than the Chancellor forecasts, preferably by the growth in revenues from faster economic growth, but also from pursuing the initiatives that the Chancellor always promises that he is taking to gain greater efficiency in the public services and public sector and to cut the public overheads.
	The Chancellor suggests instead very slow progress indeed: 37 billion of borrowing in the year just finishing; 36 billion of borrowing in the year about to start; and another 30 billion of borrowing in 200708. If only that were the end of it, I suppose that it would meet the wishes of the Labour party, but of course that is not the end of it because we know that there will be an awful lot of off-balance-sheet borrowing, too. There is no reference in the stock of debt figures to the 20-odd billion of borrowings and guaranteed moneys that have already been pushed the way of the effectively renationalised railway company. Strange accounting procedures are followed for all the private finance initiative and public-private partnership projects in which the Government have indulged on a grand scale.

Justine Greening: Does my right hon. Friend agree that many British taxpayers will get a nasty shock over the coming years when they find that they suddenly have to start paying for hospitals that they thought that their new and extra taxes had already paid for?

John Redwood: My hon. Friend makes an excellent point.
	From rough mental arithmetic, the published figure of 175 billion represents about 3,000 for every man, woman and child in the country. The Chancellor is thus asking every one of us to sign up to an additional 3,000 mortgage. On top of that, there will be additional mortgages for PFI, PPP and off-balance-sheet items, including the railways, which will probably be another 1,000 or 2,000. There will thus be a substantial increase in the national mortgage per head on top of the billions that the Chancellor has already borrowed and accounted for and those for which he has not accounted. Given that there is already quite a lot of debt in the private sector, the Chancellor should be more careful when building up public debt. After all, public debt is tax deferred; we or our children have to repay all that money with interest.

Brooks Newmark: I would be interested to hear my right hon. Friend's comments about the fact that up to 800 billion might be held off balance sheet. Should not the Chancellor be far more transparent in his accounts? Is that not the issue with which we should be dealing?

John Redwood: My hon. Friend is right to extend my argument even further. He is pointing out that we should account properly for not only borrowings that are guaranteed but not in the documents, such as the railway borrowings, and the contingent liabilities of all the PPP and PFI projects, but the massive contingent liabilities in the pensions area throughout the public sector.
	I will accelerate my argument because of my hon. Friend's question, although I was going to refer to this matter later. The Government have just said to all private businesses that they must not only have recent calculations of the deficits in their pension funds, but write those deficits on to their company's balance sheets. I understand the logic of that, and FRS 17 is the standard under the Government's requirements. My plea is not that the rule is changed for companies, but that the same rule is applied to the Government. It is obvious that the Government have a massive deficit on the pension account because theyGovernments of all parties have done this over the yearshave built up huge liabilities, but not provided any assets on the other side of the account to pay for them. We need honest public accounts that match the clarity and honesty of private sector company accounts to show us the contingent liabilities of all the pension funds.
	The Government may well counter my point by saying that one can deduce, by reading carefully the Red Book and other sources, the annual payments under the PFI and PPP contracts. However, that is not sufficient because it is a flowan income statementfor each year. We need to know the contingent liability, which is how many times the income must be paid to get rid of the contract, or how much would have to be paid to rescue the contract if the company went bust or the contract went wrong. It is how much would need to be paid to reinstate the service if there was a breakdown. We need an accurate figure for that kind of contingency.
	We know that sadly such contracts go wrong from time to time. We can expect new Governments to be elected who would like to change the arrangements, but there would be a substantial price for doing so. For example, it might prove penal to get out of the London tube contract because it is very bad. We need on the face of Government accounts a clear statement of what the contingent liability costs of all the private arrangements would be, in addition to the guaranteed borrowings and the pension liabilities.
	My concluding point on debt is simple and echoes the comments of my right hon. Friend. We are borrowing too much as a nation both through the public accounts and outside the public accounts under Government initiative and with Government encouragement. As a period of moderate to reasonable growth of the economy is forecast, we ought to rein back that debt more quickly.

Rob Marris: I think that the right hon. Gentleman has been drawing on the information in table 2.4 on page 31 of the Red Book. If he looks at the back of the Red Book, he will see a table on previous borrowings. The Conservatives were in office between 1979 and 1997, and during 11 of those 18 years, the percentage of GDP that borrowing represented was considerably higher than it has been in any year under this Government since 1997. I think that I am right in saying that in all those 11 years, borrowing was well over 40 per cent. of GDP. Does the right hon. Gentleman decry the past of his party, during some of which time he was in government.

John Redwood: I have already said that an economic mistake was made during the Conservative years. The mistake was backed and encouraged by the Labour party, but I never supported it. Yes, we borrowed more than we would have liked because of that mistake. The hon. Gentleman makes a party political point while I am trying to give a sensible analysis of the true position, so I would say that quite a lot of that debt was incurred to clear up the mess that Labour left behind in 1979, when we inherited a grossly over-borrowed and overtaxed country. Of course, the borrowing was especially high because Labour did not want to confess just how much it had to put up taxes to pay for the spending on its accounts.

Brooks Newmark: Perhaps I can help my right hon. Friend in answering the question raised by the hon. Member for Wolverhampton, South-West (Rob Marris). The problem goes back to the point about transparency that I made earlier. If one adds together the money that is off balance sheet and the amount that is on balance sheet, it comes to roughly 1.3 trillion, which is 105 per cent. of GDP, not 35 per cent.

John Redwood: Once again my hon. Friend makes his point extremely powerfully. I note that the amount has gone up by several hundred billions while he has been sitting next to me. I have seen the figure of 1.3 trillion in public commentaries and the press. It must be right if it has appeared in the newspapers, must it not? Although I have not done the calculations myself, the figure feels about right. We can leave the House with the clear understanding that there is 1 trillion or so of liabilities, many of which are not stated in the figures. Such liabilities are serious for all taxpayers and our children, so a more honest recognition of the situation would be helpful.
	I will make a final comment on the fiscal balances in table 2.4. It is a great pity that we do not have an honest account from the Chancellor of exactly what the cycle is. It is also a great pity that he does not stick to the same cycle each time he presents his figures because that would give far more cogency.

Christopher Huhne: I want to be sure that I have not misheard the right hon. Gentleman. Did he say that he thought that there was 1 trillion of off-balance-sheet liabilities?

John Redwood: I am saying that there are about 1 trillion of liabilities, which are mainly pension liabilities. The hon. Gentleman should realise how expensive many public sector pensions will be and that practically all of them are without a fund. Fortunately, the House of Commons is not in that category because we have a properly funded scheme to which Members contribute and local government is also not in that position, although there are some deficits in local government schemes. However, there is nothing but deficits when it comes to all the unfunded schemes, and there should be a recognition of that in the accounts.

Brooks Newmark: Just to be accurate, I believe that approximately 436 billion is on balance sheet and about another 150 billion is off balance sheet, which is where we get the figure of 1.3 trillion from [Hon. Members: What?]

John Redwood: rose

Brooks Newmark: Not 450 billion; 850 billion.

Madam Deputy Speaker: Order. Despite the enthusiasm of the hon. Member for Braintree (Mr.Newmark), the right hon. Member for Wokingham (Mr. Redwood) has the floor.

John Redwood: I am grateful to you, Madam Deputy Speaker, for your usual courtesy.
	The hon. Member for Eastleigh (Chris Huhne) should do some more homework. I know that he has been busy losing the leadership of his party, but he should do a little bit of reading. If he reads the figures in the Red Book on the amount of outstanding national borrowing and adds to that the pension deficits of the funded public sector schemes, the PFI and PPP contingent liabilities, the debt that has not gone through the books that should have done so, and the very large figure for unfunded pension liabilities, he would not have change out of 1 trillion. It is a good round figure that should help to inform the debate. I will leave it at 1 trillion because I have not myself done the calculation down to the second decimal point. However, I have looked at the general arguments and I am satisfied that that is the order of magnitude to which the Chancellor needs to face up.
	That brings me to box 2.5a fascinating little aside in the Chancellor's rambles through the state of the British economywith the catchy title Low yields and the Government bond market. Normally, one's eyes would glaze over and one would pass hurriedly on, because it is usually a subject for anoraks only and I do not regard myself as being in that category. [Hon. Members: Oh!] I know that I have been regarded as an interesting skier off-piste, which I found fascinating as I have never taken to the slopes on the continent of Europe in that way.
	However, I am interested in that box, and the House should be interested in it, too, because there is a serious danger that we are living through unnatural times in the bond market. Those unnatural times are already having a dramatic impact on the real economy, and they could have an even more dramatic and adverse impact on the real economy if the problem is not handled well.
	The problem began when the Chancellor, encouraged by the Prime Minister no doubt, thought that he had discovered that elixir of Labour Chancellorsa stealth tax that would raise a huge amount of money which would do no damage and which no one minded. He introduced a tax on the dividend income of British shares held through pension funds and other charitable funds. He has never published an accurate figure for how much that takes.

Christopher Huhne: It is 5 billion.

John Redwood: The general 5 billion-a-year figure is in common circulation. It started at rather less than that, to be fair to the Chancellor, but it is probably now more. It is growing. Let us take it at 5 billion, however, because he will not give us the accurate figure. He would, I am sure, concede that it is a large sum.
	If we take 5 billion a year out of pension funds for, say, 10 years of the policy, before Labour loses power, that is 50 billion out of pension funds. That is 50 billion that has not been invested, so perhaps another 20 billion would have been made on that from investment gain in income if it had been available to reinvest. We should then factor in the obvious point, which I made at the time, that the change was bound to hit share valuesshare prices valued as a stream of income from a companyand that if we tax that stream of income more heavily, it is worthless. I did a back-of-the-envelope calculation when the Chancellor proposed the tax and said that with the market valuing income at 20 times its rate, as it did at the time, the 5 billion off the stream of company income would mean a 100 billion fall in share values. Compared with the fall going on elsewhere in the German, French and American markets at the time, the fall in London was about 100 billion extra for a variety of global as well as national reasons.
	Basically, the Chancellor decided to hit the pension funds by about 170 billion over a 10-year period as a result of capital loss income and income reinvested forgone. We now see that the actual deficits may be a bit lower than that, I am pleased to say, because the stock market has started to pick up some of the lost ground that the hit and other factors caused originally, and companies have put a lot of extra money in to try to make good some of the losses caused by the Chancellor. I think that everyone agrees, however, that there is still a serious pension deficit problem.

Christopher Huhne: Just so that I can follow the right hon. Gentleman's argument, perhaps he can explain something. It is curious that he should say that there was a fall unique to the UK market given that we do not have capital controls, thanks to a move that I am sure he supported. Surely foreigners would have been buying our shares if they were such tremendous value, and there would not have been such a fall in the UK market.

John Redwood: The main holders of UK shares at the time the change was made were British people and companies, especially their pension funds. There was bound to be a weight of selling to adjust the market value of those shares which exceeded the appetite from abroad. Hon. Members should remember the background. A fall in the world market took place shortly afterwards, so there was not a great appetite for what foreign companies perceived to be higher-risk overseas shares in a foreign currency at the time when adjustments were made in British portfolios to reflect the diminution in share values.

Christopher Huhne: indicated dissent.

John Redwood: I do not think that the hon. Gentleman understands the situation. It is obvious that share prices were going to fall. He does not have to believe me; he merely has to look at what happened. What is the explanation for the additional fall of the London market if it is not the Chancellor's tax policies, taking income out of the hands of companies and savers?

Christopher Huhne: Will the right hon. Gentleman give way?

John Redwood: If the hon. Gentleman really wants to be knocked again, then fine.

Christopher Huhne: Clearly, there would be some home currency questions, but the idea that it was one for one is simply absurd. There is no support for that in any literature or in what happened.

John Redwood: The facts are clear: the London market fell rather more than other markets. I gave my sum. If the hon. Gentleman has an alternative sum to explain that decline, I look forward to hearing it in his speech if he catches your eye, Madam Deputy Speaker, and if he has done his homework by then, but he has come here not having done any homework and is just hoping to tell his local papers that he is back doing the normal day job.

Justine Greening: I wonder whether one reason for the fall was the growing uncertainty over the Chancellor's performance and the fact that he will change his mind about policies, such as the inclusion of property in self-invested personal pensions. Increased uncertainty about regulation can only harm our economy.

John Redwood: I am reluctant to disagree with my hon. Friend, but I am not sure that that was a factor when we had the major fall in the stock market. I have set out my views. Perhaps she can set out her views in her contribution.

Nicholas Winterton: On pensions, the Government apparently exhort people to save, in particular for their retirement. Does my right hon. Friend, to whose speech I am listening extremely carefully, believe that withdrawing the dividend tax has helped and encouraged people to save for their future, because that is critical?

John Redwood: I was going on to say that it clearly did not. In fact, it did the opposite. As a result of that, a large number of companieswell intentioned towards their work forcehave said, We can't afford this any more, so we are going to close our funds. In some tragic cases, as we heard recently in the House, funds have folded altogether because a company has gone bust or is unable to make the contribution, and the funds do not have sufficient money to meet the requirements. A new generation of people who are going into work or are in junior positions in industry or commerce no longer have access to a final salary scheme. They are probably saving proportionately less, with the help of their employers, than under the old regime.
	Worse still, the regulators and actuaries now say that because those funds are very mature, they should be invested not in equities, but in bonds. They have triggered either a mass exodus out of shares into bonds, or they have persuaded or required funds to buy only bonds and not shares. We now have a huge build-up in bond commitments and a run-down in equity commitments. That has had two unforeseen consequencesI think that they must have been unforeseen; I should not think that the Government wanted them.
	The first unforeseen consequence is that corporate Britain is up for sale because equities in Britain appear to be relatively lowly rated compared with equities elsewhere. Many great British companies are successfully bid for from overseas because the natural buyers of sharesthe pension fundsare not there to take the values up to levels that overseas buyers would find less attractive. We have seen O 2 , PO, BOC and various others companies sold out, for premium, to overseas buyers because the UK equity market is relatively lowly rateda direct consequence of the tax raid and the pension fund position. I see Labour Members getting uncomfortable. They obviously do not like corporate Britain being bid for, but they have no other explanation.

Alan Simpson: I am interested in what the right hon. Gentleman says about the balance between equity markets and bond markets. Surely the biggest blow to equities was given by the collapse of the market following the horrendous speculative piece of adventurism, which in 200102 saw 250 billion of UK workers' pension funds wiped off because money had been used in a cavalier fashion, pushing share values through the roof, well beyond any realistic price. As a result of that and the unregulated market, which we created, people have lost their pensions and seen the money pilfered by everyone apart from the brokers who made the money out of the transactions.

John Redwood: The figures show that the tax rate was far more important, but I agree that value was destroyed in global capital markets around 2000. The high-tech sector had been bid up to levels that proved unsustainable. That was particularly true of companies that had little turnover and no prospect of a profit. There was a big blow-off in the United States of America, but a lesser one in the UK because the situation had developed less dramatically. A special factor in the UK led to the collapse in share values in telecoms and high-tech areas, and it goes right back to the door of the Treasury: the Chancellor's decision to target telecoms for another of his stealth taxes that would do no damage. If one takes 21 billion-worth of tax in a single go out of the lead sector[Hon. Members: It is not tax.] We are now told that money going from companies involuntarily to the Treasury is not a tax. I do not care what Members wish to call it, but it looks like a tax and it feels like a tax.

Rob Marris: The right hon. Gentleman has just made   an extraordinary statement. He used the adverb involuntarily. The transactions to which he referred were not involuntary; they were bids in a free market by telecoms companies. In retrospect, most people would agree that they over-bid, but they made the bids. It was not a mandatory tax; it was an optional purchase.

John Redwood: It was effectively a mandatory purchase. The companies were bidding for monopoly licences and rights to the airways, and if they had not done so they could not have stayed in that kind of business. Of course they had to pay. If one offers fewer licences than there are companies wishing to buy, one will raise a very large sum. Indeed, I pay full tribute to the Chancellor and his advisers for optimising the take for the taxpayer by the brilliance of the auction that they worked out. It just happened to do enormous damage to our lead sector, and therefore to share prices in companies such as BT and Vodafone, which happened to be the leading investments for pension funds at the time. The hon. Member for Nottingham, South (Alan Simpson) is right that pensioners and future pensioners suffered badly from that, but the Chancellor once again played a prominent role, causing that problem.
	We have undervalued companies that are now being subject to aggressive overseas bids, often when we do not have reciprocal rights in overseas markets, and bonds valued on tiny yields, which in turn increase pension fund deficits. That has created a virtuous circle for the Chancellortake more money out of funds, damage the funds, get them to buy bonds, take the price of bonds up so that the Chancellor can pay for his borrowing more cheaplyand a vicious circle for pensions: get them to buy more bonds, value the bonds pessimistically, increase the deficits, demand they put more money in and pay more bonds. It is not a healthy situation.
	I was very pleased to see the well known commentator, Anatole Kaletsky, this week at last putting that into the newspapers, explaining that the regulatory system could be creating a future large-scale crisis in pension funding. Therefore, my serious message to those on the Treasury Bench is: please look at the bonds spiral and the role of the regulators, and see whether there is a way of avoiding a future funding crisis. What if at some future date people decide that bonds are overvalued and yields go from, say, 4 to 5 per cent., which is not an impossible scenario? That would wipe out a quarter of the total value of pension funds. Is it true to say, at those levels, that bonds are risk-free, a safe investment and the right way to match future liabilities, given that the bond has a fixed income and liabilities have a rising price?

Graham Stuart: Does my right hon. Friend agree that at the end of that series of complex financial transactions, there is a human costcompounding damage to those who put money aside for security in old age? There may be sniggering on the Labour Benches but there is a clear, logical link between the tax on pensions and the impact on companies and the drive on to bonds. That is why people are no longer saving for their old age and there is the horrifying prospect, about which Labour Members seem to be happy, of 70 per cent. of people in this country being dependent on means-tested benefits by 2050.

John Redwood: My hon. Friend makes an extremely good and different powerful point, with which I entirely agree. It is a great worry. The lack of a proper savings culture, which has probably been influenced by all the uncertainty and damage to pension saving, is certainly not helpful.
	I hope that those on the Treasury Bench have understood that there is a serious national problem. I put it to them in that spirit; I am not making a party political point. They need to tackle the matter urgently.

John Bercow: Before my right hon. Friend moves on to his next topic in what is proving to be an extremely interesting disquisition on the state of the British economy, may I invite him to underline in clear terms what is now a worrying apartheid between the public sector and the private sector? He has described what many companies have faced as a result of the perverse and iniquitous taxation policy of the Chancellor. Is it not disturbing that the wealth-creating sector has been so savaged, while the Chancellor has been unduly preoccupied with the creation of new jobs in the public sector, which is the sector for which the wealth-creating sector is obliged to pay?

John Redwood: I quite agree and I shall come briefly to that very issue of public sector efficiency and productivity.
	In chapter 3 of the report there are measures to meet the productivity challenge. The main issues seem to be addressed in the Chancellor's mind to the private sector, but if one splits the disappointing figures for productivity growth in the past year or two, one sees immediately that productivity growth in areas such as manufacturing has been pretty goodit has had to be, because it is an extremely competitive global world out therewhereas productivity performance in the public sector has been poor to abysmal. The Government think that the figures are so bad that they have decided to call them in for re-examination and re-presentation. That is how serious it is. The figures are beginning to hit them in the headlines so they will need to be recalculated or suppressed.
	On the figures that we have had so far from the Government, it appears that productivity in the health service has been falling by 1 per cent. a year against the background of a massive increase in spending, which the Government rather foolishly call investment. There is a lot of investment going into the health servicethat is in capital expenditure and it ought to be increasing productivity, but it does not seem to be working. There has also been a lot of increased spending, but much of it appears to be on unnecessary jobs and activities that are not related to front-line actions. That is one of the reasons why there are not more beds, more operations and more treatments. I hope that the Government will therefore regard productivity as especially a public sector challenge and that they will understand that merely presenting Gershon as a nice idea is not sufficient. They have not only to implement Gershonwe hear of stumbling progress; I think that they are a long way from full progressbut to introduce son of Gershon very quickly.

Justine Greening: Is my right hon. Friend aware that the Department for Work and Pensions, for example, is to spend 500 million on voluntary and involuntary redundancy schemes over the next two to three years? Does he agree that that is clearly an ineffective way of running a Department?

John Redwood: It is horrifying; what a waste of money. The rate of run-off and natural turnover in public sector employment is very high in most such departments. Surely it is possible for the Government to cut staff numbers in administration and unnecessary activities quite rapidly by ensuring that they do not replace staff and that where genuine vacancies occur for real jobs people are transferred from less important posts. It can be extremely good for morale in a department to have a staff freeze, because it creates promotion opportunities for those who remain. It is certainly better for morale in a department to try to run the change and to gain savings by a staff freeze and by transferring people to jobs that really matter than to embark on mass redundancy programmes. It clearly makes a lot more sense for the taxpayer than would spending the money on voluntary or compulsory redundancies.
	The Chancellor understands that productivity also needs to be improved through working away on education. It is wonderful to share the Lobby with him in order to try to secure some reforms to our schooling system, which I hope he will want to take considerably further. It is a slight move in the right direction, but I am impatient to go a lot further and faster, and I always think that we are so much better when we are at our boldest. I would like my party to be much bolder on all those things.

Mark Tami: What about selection?

John Redwood: Yes, selection is very important, which is why I support the view of the Leader of the Opposition that we should select on ability as well as aptitude. We should select across disciplines, as specified in our policy, and we should defend our very good grammar schools, of which people are rightly proud. Many hon. Members are here only because they went to very good grammar schools or direct grant schools, as I did. We are grateful for that opportunity, so we do not wish to pull up the ladder on such proposals.

Ivan Lewis: Tell us morethe hidden agenda on selection is revealed.

John Redwood: The Minister is heckling me, but he clearly has not studied Conservative policy carefully enough. The Leader of the Opposition is keen to preserve all the great grammar schools in this country and in Northern Ireland, as I am. He is keen to introduce sensible selection in our comprehensive system, and effectively to create a grammar school stream at the top of every comprehensive, which is a very good way of raising quality. Indeed, it is the Minister's own policy for certain disciplines, such as modern languages, where he does believe in selection on aptitude, which is another word for ability, as we all know. When I asked the Prime Minister what the difference was between aptitude and ability in modern languages, his answer was notably deficient. I am glad that the Chancellor, in the guise of the Secretary of State for Education and Skills, said that more needed to be done in further education. He said that we need to take skills education much more seriously, and we may find common ground in trying to achieve such improvements.
	The Government could make an important contribution to improving our productivity and efficiency if they sorted out a couple of things for which they have prime responsibility. They have been in power for nine years, but we still lack an energy policy. They play an important role in energy, as they need to send the right signals in their tax and market-influencing policies, and they issue planning permission for new power stations. The Chancellor glided over the matter in his speech and in the document, but it is high time that we had an energy policy. If we wish to develop process industry in this country we need better answers on energy availability and price. In the past few weeks, there has been too much reliance on the spot price, which has gone all over the place because of the imperfections of the continental market.
	The Chancellor and the Secretary of State for Trade and Industry have both said that the Government intend to push for proper competition inquiries in Europe to try to free the market so that we can achieve access to a good supply of gas and other power at sensible prices. When will the Government persuade their partners to do so, and when are things going to be open? This is an urgent matterit is no good saying that it may happen next year.
	The Government often play a lead role in transport. We have a 21st-century economy and a very good private sector, but we have a mid-20th-century transport system that is in desperate need of more capacity and modernisationa word that the Government usually like but which they misinterpret. I hope that they will soon come up with a way of increasing transport capacity on both the road and the rail system, and I hope that it will harness private finance. I am not putting in a bid for extra public spending, as a huge amount of money is available for sensibly worked-out road schemes to expand transport capacity. The bipartisan project for the relief road around Birmingham offers a good model, and we need more of those projects. I hope that the Chancellor accepts that if we are to improve the country's economy and productivity we must tackle those road blocks, which hinder the movement of goods and people.
	Finally, I would like to raise the issue of regulation. In his Budget statement and in the supporting papers, the Chancellor talked about the need for better regulation. Indeed, at times, he even talks about the need for deregulation. In the past, I have warmly welcomed his conversion and that of the Prime Minister to the view that we are a greatly over-regulated society. I welcome their conversion to the notion that certain regulations are unnecessarysome of them achieve the opposite of what they set out to achieve and other regulations are simply too expensive, given the aims that they set themselves.
	We have heard fine words and speeches, and the first of two promised Bills on deregulation has finally been introduced. It is therefore an enormous disappointment that there are two problems with the Legislative and Regulatory Reform Bill. First, it does not include any provisions on deregulation. With the agreement of all my Conservative colleagues, I have proposed 63 things that we would like to deregulate immediately. Personally, I could cite another 100, and I may persuade my colleagues to back them in due course.

William Cash: Would my right hon. Friend not like deregulation of European legislation as well?

John Redwood: Of course, I would. There are some European items among the 63 in the agreed party programme, as it is impossible to deregulate in Britain without deregulating matters with which Brussels is involved.
	The second big problem with the Bill is the inclusion of an offensive group of clauses that gives Ministers the right to legislate without reference to Parliament. The Bill does not even specify that it has a deregulatory purpose. We were invited to accept a Bill that could re-regulate Britain, taking more of our freedoms away without due process. I hope that Ministers accept that that was a gross error and a huge misjudgment. The country desperately needs proper deregulation, and a Bill is proceeding through Parliament that would allow us to achieve that. We would be delighted if the measure were subject to major amendments and surgery. We would be willing to co-operate if the Government dumped the clauses that give them too much power to legislate by the back door and included in the Bill some genuine deregulation.

John Bercow: My right hon. Friend will probably recall as well as I do that the right hon. Member for North Tyneside (Mr. Byers) talked about the case for sunset regulation as long ago as 2000, but little has happened since. Given that more than 99 per cent. of businesses in this country employ fewer than 100 people but account for approximately 50 per cent. of the private sector work force and generate two fifths of national output, does he not agree that it is time that the   Government looked at, and learned from, the experience of the United States by studying the Regulatory Flexibility Act 1980 and the Small Business Regulatory Enforcement Fairness Act 1996? If they did so, they could learn a great deal.

John Redwood: My hon. Friend makes an extremely good point, and I agree with him. I would, however, like to go further, as I do not want to deregulate just one sector of trade or commerce, or one size of company. I accept that small companies are badly oppressed by too much regulation, but we could strip out some major regulations for everyone. Earlier this week, the Minister and I debated the regulation of financial services in Committee. I made the point that I agreed with the Government's rhetoric on the system of regulation for the European Union as a whole and the United Kingdom in particular. The Government said that competition was better at regulating than regulators and that greater freedom produced enterprise and flexibility. The Minister said that I did not need to tell him that competition was the best regulator, as the Government understood that intuitively.
	I am delighted that we agree about what we wish to do, but the difference between us in our current roles is that the Minister has the power to do something about it, but I do not. Now that we have agreed on the remedy, I urge Ministers who have the power to put it into effect to get on with it. We all know that the country is crying out for less regulation and that far too much regulation comes from Brussels. Treasury Ministers say that they have a unique relationship with their European partners; they have enormous influence and Europe is going their way. They say that they want a less but better regulated Europe. When will those fine words translate into action? Since the Prime Minister last spoke about the need for a deregulated Europe, 2,000 new regulations have been introduced. Why did the United Kingdom sign up to all those regulations? Why did we not use our influence to say no? Why have we signed up to a 72-point action programme for financial services in Europe when the required regulation is either already in place nationally or will be put in place globally? When we know that we need to compete in a global marketplace, is it not much better that regulation is put in place globally, so that we are competing on a level playing field with the Indians, the Chinese and the Americans, as well as with the French and the Germans? There is no need for mezzanine regulation in big global areas such as financial services or some of the other leading globally organised industries. There may be some need for global regulation, and that surely is the level at which Ministers should concentrate their attention.
	The Chancellor rightly said that the world is changing extremely rapidly. He rightly drew attention to the growing competitive challenge from India and from China. He may also have mentioned Brazil and Russia. The new large economies are growing very quickly. They are importing a great deal of technology and ideas, and in some cases they are exporting a great deal of capital because they are generating very large surpluses. The pattern of world trading is changing extremely quickly. We must understand that for Britain to have a prosperous future, as she has had a prosperous past, we need to turn our attention much more to countries of the size and pace of change of India and China.
	Britain's great advantage in the next 30 or 40 years is that we have a special relationship with India. We have strong ties, a common language for business and political purposes, and quite a lot of common systems as a result of our shared history in the 20th century. We need to turn that to good effect and play the game in the spirit of the recent cricket exchanges, where India won one and we won one. We need to develop that relationship as strongly as we can, because it will help pay the livings of our children and grandchildren in the future.

Andrew Love: I have followed the right hon. Gentleman's speech with interest. On the productivity challenge, which I accept, he has not touched on the conundrum of business investment. Companies in the UK are making what some would consider record profits. Interest rates are low. There is a crying need to improve our productivity, even in the private sector, although I take some of the points that the right hon. Gentleman makes about the public sector. How do we overcome that problem?

John Redwood: That is a very good question. I have shortened my remarks because I know that other hon. Members want to speak. The point of my argument about pensions answers the hon. Gentleman's point about investment levels as well. The main reason that British companies are not investing more in plant, equipment and new ideas is that every spare pound they generate is likely to have to go to make good the deficit in their pension fundsdeficits that are being exaggerated or made worse by the actuarial advice on and by the method of compensation of the value of assets and liabilities.
	If the Chancellor takes the pension fund problem seriously and can find some kind of regulatory amelioration, the hon. Gentleman will find that more of that cash flow will become free for expenditure on improving the real assets of the country and generating more wealth. Similarly, more money will be available for equity investment through the stock exchange. There is not so much equity investment available from British sources through the stock exchange for exactly the same reasonpeople are told to put their money into bonds, not into new share issues by companies, which could otherwise finance new ideas, new technology and extended ideas for companies.
	My concluding point is on the change in the world. According to the European Union's projections, which are a little out of date as they were issued in 2002, the 15 main EU economies, which represented 18 per cent. of world output in 2000, would represent only 10 per cent. of world output by 2050. I think that is a wildly optimistic forecast on the part of the European Union. If one looks at the pace of change, the relative decline of some of the continental economies and their populations, and the enormous success of India, China, Brazil, Russia and the other emerging countries, one realises that there is no way in which the EU 15 will still represent 10 per cent. of world output by 2050.

William Cash: Did my right hon. Friend notice the way in which the Chancellor of the Exchequer in his speech this afternoon distanced himself from the eurozone, but did not go one step further and say that the Government had made a terrible mistake in committing themselves to the euro, the ERM, the constitution and all that goes with it? For practical purposes, he is prepared to criticise the European Union but not prepared to go that step further and say that we will have nothing to do with that aspect of it.

John Redwood: My hon. Friend is right. An honest Chancellor would have said, The game is up. I now realise that joining the euro would be quite inappropriate for Britain and we would be much better off getting our regulations into line with the leading countries and power blocs in the world, not regulating at the mezzanine level in the European Union. This is the point. On its own figures the EU will almost halve as a proportion of world output. On more independent figures, it will not do that well. It will fall even more, and we will not be earning our living sufficiently if we hitch our wagon entirely to the European train or bus. We need, instead, to be aware that the life and growth in the world economy will be in America, India, China and the other emerging countries. Our foreign policy should be geared to that, and so should our economic and regulatory policy.
	For the information of Labour Members, I have spoken as the Member of Parliament for Wokingham. I have not bound the Front Bench team by what I have said, nor have I bound my economic competitiveness policy committee. We will report, I trust, next summer and it will give me great pleasure then to speak for that. I am not backtracking on anything. I have expressed my views in my capacity as the Member of Parliament for Wokingham, the proudest capacity of all that I hold,   and if they in due course are adopted by the committee, I shall be delighted. If the committee's recommendations in due course are adopted by my party leadership, I shall be delighted. I thought Labour Members should know that.

Rob Marris: I pay tribute to the right hon. Member for Wokingham (Mr. Redwood). He is right, of course. The world might fall in tomorrow. On present trends, I disagree with him. I shall give him a small example with a statistic that he used towards the end of his speechthe position of the EU 15 in 2050. He had severe doubts whether we would have 10 per cent. of world trade by then. It is difficult to predict, but on current population projections, the population of the 15 in 2050 will be approximately 5 per cent. of the world population. To suggest that as the rich west we would be batting double at 10 per cent. of world trade seems to me to be entirely credible. It may not happen. I hope I am here with the right hon. Gentleman to check. It is true that the world might fall in tomorrow, but I do not think it will. Nor does the Organisation for Economic Co-operation and Development.
	The OECD last October, five months ago, stated:
	The UK is a leader in the quality of its monetary and fiscal policy frameworks amongst OECD countries.
	It continued:
	The framework has played a key role in improving macroeconomic stability relative to both the past and to other OECD countries.
	The International Monetary Fund last December commented:
	Macroeconomic stability in the United Kingdom remains remarkable . . . This impressive record owes much to good macroeconomic, financial, and structural policies, underpinned by sound policy frameworks.
	In its Audit of Assumptions for Budget 2006, the National Audit Office, at paragraph 67 on page 14 in relation to the underlying growth rate stated:
	Over the four year Rolling Review period since 2002, the rate assumed for underlying or trend growth for the purposes of making the fiscal projections was 2 per cent. per year up to the end of 2006.
	That is the rate assumed by the Chancellor and the Treasury. The NAO goes on to state that
	the assumption was reasonable and cautious.
	It continues:
	Looking forward, the Treasury assumption of 2 per cent. from 2007 onwards is at the bottom of the range of external estimates . . . On this basis, the Treasury assumption currently appears reasonable and cautious.
	Of course the world might fall in tomorrow. Past indications, like the stock market, provide only a limited indication of the future, but the indication is that the worldthe roofwill not fall in tomorrow.
	On borrowing, I share some of the concerns of the right hon. Gentleman, and I have done so for a number of years, as hon. Members know. I shall not recite the figures, but they were far worse under the Labour Government in the mid-1970s and under most of the Conservative Government through the 1980s and 1990s. There is a role for Government borrowing, but the focus should be either counter-cyclical or investmentI use the term investment in its commercial sense, and not in its somewhat devalued political sense, where it is used as a substitute for the word spending.
	Table C1 on page 250 of the Red Book lists net investment and public sector net borrowing. In 200304, net investment was 1.3 per cent. of GDP and public sector net borrowing was 3.2 per cent. of GDP, so there was less investment than borrowing, which is worrying for me. Similarly, in 200405, net investment was 1.8 per cent of GDP and net borrowing was 3.4 per cent. of GDP. The estimate for the financial year that is about to end is net investment of 2.1 per cent. of GDP and public sector net borrowing of 3 per cent. of GDP. The estimate for next year is net investment of 2.2 per cent. of GDP and net borrowing of 2.8 per cent. of GDP. In 200708, the estimate is net investment of 2.3 per cent. of GDP and net borrowing of 2.2 per cent of GDP. In 200809, the estimate is net investment of 2.3 per cent. of GDP and net borrowing of 1.7 per cent. of GDP. In 200910, the estimate is net investment of 2.3 per cent. of GDP and net borrowing of 1.6 per cent. of GDP. In 201011, which is as far as the table goes, the estimate is net investment of 2.3 per cent. of GDP and net borrowing of 1.5 per cent. of GDP. I think that that trend is healthy, and I welcome it.

Adam Afriyie: The hon. Gentleman is underpinning his argument with lots of forward-based statistics on debt and borrowing. What would happen to those figures if PFI borrowing were brought into the equation?

Rob Marris: I cannot give the hon. Gentleman the exact figures. He has raised the question of PFI borrowing, and I think that in a commercial sense, which I am sure appeals to him, if one were to include PFI borrowingI agree that we should have the full figuresit would to my mind, although perhaps not to his, be investment, because it goes on schools, hospitals and roads. Given my politics, I would call that investment, although I hasten to say that I do not know whether the Chancellor would include it in table C1.

John Bercow: The hon. Gentleman has neatly elided into precisely the topic that I want to cover. Leaving aside both the sustainability and the cost of existing Government borrowing, is it not in any sense a source of concern to him that there is a huge disparity between the vast increases in public spending, for the purpose of which the Chancellor is borrowing so significantly, and the very poor increase in productivity? In the health service, spending has vastly increased, but, for example, the number of clinical episodes has not.

Rob Marris: I refer the hon. Gentleman to box 2.2 on page 22 of Productivity in the UK 6: Progress and new evidence, which was released with the Chancellor's papers today. I will not detain hon. Members with the figures, but, as I think that he appreciates, it is notoriously difficult to measure productivity in the NHS. Turning to what I take to be his casehe will correct me if I am wronghe has done himself a disservice. We should all be concerned about public sector productivity, and I am convinced, although he may not be, that the Chancellor and the Government are concerned about that, too. He has done his case a disservice with his comment about the NHSI made a similar comment to this on the first day of last year's Budget debate. If the average time allocated for a GP to see a patient goes up from eight minutes a patient to 12 minutes a patient, it is a significant decline in productivity, which I wholly welcome, and I suspect that Conservative Members welcome it, too. In a commercial sense, that is one example of declining productivity in the NHS, but I think it fantastic.

Graham Stuart: One of the problems associated with longer GP times is the time spent using choose-and-book technology, which takes nearly twice as long to use as was originally expected when it actually works. As the hon. Gentleman knows, the Prime Minister's policy unit reported in 2004 that it felt that there had been a 20 per cent. drop in NHS productivity. This is the great crisis: in the early '90s, NHS productivity was growing strongly; under this Labour GovernmentI think that the hon. Gentleman would agree that Ministers should take responsibility for thisproductivity has fallen on normal stable measures.

Rob Marris: As I said to the hon. Member for Buckingham (John Bercow), I refer the hon. Gentleman to box 2.2 on page 22 of Productivity in the UK 6: Progress and new evidence, which the hon. Member for Buckingham is avidly readingthe hon. Gentleman will probably seek to intervene on me again. Box 2.2 discusses
	The latest Health Productivity Article published in February 2006
	and points out that it is extraordinarily difficult to measure NHS productivitythe report's authors aremuch more knowledgeable on public sector productivity than me. I have already said that I believe that the Chancellor and the Government think that public sector productivity is extremely important, but it is very difficult to measure whether an apparent decline in productivity in a particular part of the NHS is desirable in social terms.

John Bercow: The hon. Gentleman's prescience is impressive indeedhe foresaw that I would want to intervene on him again, and he was right to do so. He is an extraordinary parliamentary specimen, because it is commonplace for an hon. Member to refer other hon. Members to statistics that support their case, but it is relatively uncommon for an hon. Member to refer others to statistics that directly contradict it. He knows that in the box to which he has referred the figures show a decline in productivity of between 0.6 and 1.3 per cent. a year between 1995 and 2004, but in the same box the Government complain that the figures
	take no account of quality improvement.
	In other words, if the figures support the Chancellor, the Chancellor is content, but if they do not, he tries to rubbish them. Does that concern or preoccupy the hon. Gentleman, because it should?

Rob Marris: I would be concerned, if the hon. Gentleman had not quoted selectively. I shall read out the whole sentence, which I dislike intensely because it starts with a conjunction:
	But these estimates take no account of quality improvement, as the Atkinson Review recommended should be the case.
	The hon. Gentleman's implication that the Chancellor has adopted a pick-and-mix approach is not fair. I say to hon. Members in all honesty that I have no idea what the Atkinson review is, but it is presumably about NHS productivity.

Several hon. Members: rose

Rob Marris: I am not foolish enough to take interventions on what it is. Nevertheless, an apparently independent body that is dealing with productivity takes a view that is shared by the Chancellor.

David Taylor: The hon. Member for Beverley and Holderness (Mr. Stuart) quoted with approval the increase in productivity rates in the health service in the period before 1997. However, it is a fairly well understood economic principle that when one brings into productive use resources that were unused on the scale that was the case under that Government, they are generally less productive, and therefore average productivity is bound to decline. It is the law of diminishing returns. There is nothing special about having high levels of productivitythat can be achieved by sacking the least marginal resources in any productive enterprise.

Rob Marris: I agree with my hon. Friend, who, as a cost auditor by background, is much more knowledgeable about these matters than I am. As regards what was going on in the NHS in 1997, I was a trade union solicitor working closely with the Unison branch at the main acute hospital in Wolverhampton, as well as the branch at the health authority which became the primary care trust. The hospital was doing what in industrial terms would be called sweating the assets, which was wearing out staff.

Graham Stuart: In response to the hon. Member for North-West Leicestershire (David Taylor), in private business it would usually be expected that if one invested more, particularly if one doubled expenditure in an area, one would expect a step change upwards in productivity rather than the opposite.
	To try to take a little heat out of the debate, I think that it is generally accepted within the NHSand even among health Ministersthat productivity is a problem. That is one of the reasons why the record investment that has gone in is not delivering. We can all move forward if we at least accept that there is a serious problem. Whoever is in government in the next five to 10 years, we must all work together in this House to support common-sense steps to increase that productivity.

Rob Marris: I would not agree with using the word problem about productivity in the NHS, but I completely agree that it is an issue that a Government of any colour need to address. All that I was sayingI did not want to get bogged down in thiswas that it is very difficult to measure productivity in the NHS and that there is a social dimension because it is a public service.

Kevan Jones: Although this anoraks' debate between my hon. Friend and the hon. Member for Buckingham (John Bercow) is important and enlightening, does he accept that the main thing that my constituents are bothered about is waiting times? When I was first elected to this House in June 2001, the average waiting time for elective surgery was 18 months to two yearsnow, because of the extra investment that has gone in, it is down to four months.

Rob Marris: I entirely agree with my hon. Friend. There is a similar situation in Wolverhampton at the acute hospital, New Cross.

John Bercow: rose

Rob Marris: I will give way to the hon. Gentleman, but I should first say something that I should have said in response to his last intervention, when he kindly talked about my prescience. I thought that he might have acknowledged my prescience in terms of having been able to get as far as box 2.2 on page 22 of this obscure report, which was released only two hours ago.

John Bercow: I am happy to pay dueindeed, elaboratetribute to the hon. Gentleman for that capability. I do not intend to probe him on the details of the Atkinson review, of which I suspect both of us are pretty ignorant. However, it will be a very sad state of affairs if at the next election the Chancellor is reduced to trudging around the marginal seats of this country in his campaign bus chuntering, in response to any protesting elector, the slogan, The Atkinson review! The Atkinson review! I think that in such circumstances he will be thought to be in need of some assistance or treatment. Does the hon. Gentleman accept that the central issue

Mr. Deputy Speaker: Order. I am conscious that interventions are getting longer and longer. Many Members are waiting to catch my eye, so I think that that is enough from the hon. Gentleman for the time being.

Rob Marris: I will not be tempted much further down this path save to say that as someone in a marginal seat, I will be more than happy during the next general election to welcome the Chancellor, whoever she or he may be.

John Redwood: Is not the worry about the NHS that there has been such a large build-up in non-medical personnel at the time when all this money has gone in? Would not the investment be proving its worth if the new computer systems and administration systems showed that we could cut the number of administrative staff, where surely his quality objection would not come into play? We have more administrative staff than nurses or doctors, so should not we spend to reduce that burden?

Rob Marris: I suspect that the right hon. Gentleman comes from a more commercial background than I do, but I too come from a business backgroundI spent the majority of my working life in the private sector. One should not simply rely on a commercial model as regards NHS finances and structures, and I am not suggesting that the right hon. Gentleman takes that view, but it can be illuminating to use it for comparison purposes. Arguably, the NHS was for years unadministered. The statistic that the right hon. Gentleman cites, which is commonly cited by Opposition Members, is one of those that can be extremely misleading in certain hands. For example, in some statistical, taxonomic senseto use the kind of word that the hon. Member for Buckingham would usea matron could be counted as an administratrix, to use the proper Latinate originate, or an administrator, in everyday terms. But most people, including, I suspect, the right hon. Gentleman, would not consider a matronwe reintroduced them, of courseto be an administrator or manager when looking at the figures to determine who is front-line and who is not.

Alan Simpson: One example of the difficulty of setting productivity measures in the NHS is to be found in the parallel debate about productivity in health care that is taking place in France at the moment. There, people are arguing that it is productive to reduce bed occupancy rates because their measures of efficiency are to be based on reductions in readmission rates and hospital infection rates. So, to make the system less intensely used is to make it better, in terms of productivity in health care. To use strict numeric terms in regard to volume throughput might therefore miss some of the really critical health issues on which productivity ought now to be measured.

Rob Marris: Absolutely. My hon. Friend makes an important point. It is extremely difficult to measure productivity, particularly in the social or public sectors.
	Another measure of productivitywhich Opposition Members, especially those on the Conservative Benches, never cite, but which I always have to cite in Budget debatesrelates to our work force, and its participation rate of 75 per cent. There is indeed a gap between us and France in terms of output per person-hour. That is true. It is quite a significant gap, although we have halved it in recent years, as the Chancellor pointed out in his Budget speech. However, in terms of output per person of working age, there is almost no gap at all.
	Economists have traditionally used output per person-hour as their primary measure of productivity, for understandable reasons; it is an extremely valuable tool for a business that is planning investment, for example. For society, however, it is much more important to look at the output per person of working age, because that tells us not only about relative measuresas productivity per person-hour doesbut about the absolute size of the pie to be divided up for public services according to the national wealth. Productivity per person of working age is an extremely important measure, given our labour force participation rate and our achievements so far on skills, about which I shall say more later.

Greg Clark: An even more important measure is the rate of growth of productivity, not just its absolute level. In each of the three terms of this Labour Government so far, the rate of productivity growth has fallen.

Rob Marris: I am grateful to the hon. Gentleman for that intervention, because it illustrates the dividing line between his party and mine. Of course the rate of growth in productivity is important. I think that he said that it was the most important measurehe will correct me if I am wrongbut it is not the most important one to me. The most important thing for me is the size of the pie that we can divide up, as equally as possible, in our society. That is to do with the way people live, and their quality of life. To say that the most important measure of productivity is output per person-hour and to point to the slowdown in the rate of its growth are of course important, but that is not the most important thing to me. Those are dry statistics; I want to talk about people and the size of the social pie.

Greg Clark: Far from being dry statistics, these measurements go to the heart of the matter. I am not interested in the pie as it stands at present. I am interested in the future pie, and the growth in our productivitycompared with that of our competitorsdetermines the size of the pie to be divided up. The fact that the hon. Gentleman is concerned only with the past and the present is a poor comment on his ambitions for our country.

Rob Marris: I did not say that I was just concerned with that issue. This is to do with where my primary concern lies; that is all. Of course I am worried about the future. I also worry about the present more than the hon. Gentleman does, because it is my Government who have to deal with the present. It is his prospective Government who might have to deal with the future, although I hope not for a long time.
	We need to bear in mind that, after nine years of this Government, we have 2.4 million more people in work, two thirds of them in the private sector. That is having a huge effect on people's lives. It does not mean that every problem is solved, but it is a major positive for our society that is not oft remarked on by Opposition Members

John Bercow: rose

Rob Marris: But perhaps the hon. Gentleman is about to do so.

John Bercow: I am very worried about the drift of the hon. Gentleman's speech. He said a few moments ago that it was notoriously difficult to measure productivity in the health service. He then agreed that the rate of growth of such productivity was important, although not necessarily the most important factor. If productivity is difficult to measure, it is difficult to see why he would regard it, and particularly its rate of growth, as so important. May I put it to the hon. Gentleman that the advances in medical science are such that there will always be a new queue whenever there is a new cure? That increases, rather than diminishes, the importance of productivity growth, as we must ensure that we get maximum value for money for the finite resources that will be available.

Rob Marris: This will be my last word on this issue and I hope that hon. Members will forgive me if I do not give way further on health service productivity. The hon. Gentleman says that there will always be a queue. With the advent of statins, there is no longer a queue for heart surgery, but there may be a queue down at the pharmacy for a few extremely important pills. Do we therefore say that heart surgeons are less productive because they are carrying out less surgery? That might be so, but I am not going to continue on the NHS.
	We need to focus on the 2.4 million people who are employed, two thirds of them in the private sector, and on the quality of their lives in terms of public services and income, because obviously income, the size of the pie and growth in the pie are important. The relative position of the United Kingdom, a statistic mentioned by the Chancellorwhich is not often remarked on, and perhaps not at all todaywas that this country's gross national income per capita when we came into Government was seventh in the G7 group of advanced industrial countries. We are now second out of seven. That is not to say that everything is rosy, but it looks like a darn good trend to me. As far as I am aware, that change is not just because the income of the other five has suddenly been cut, but because it has not increased as much as ours. That is extremely important and, again, is connected with the labour force participation rate. I will give way on this point, before I move on to more micro-matters.

Graham Stuart: I thank the hon. Gentleman, who has been most generous in giving way. Earlier, he mentioned points about the Labour Government's record that do not often get the praise that they deserve. Will not he accept that when the Labour Government came to power, the UK economy was the most powerful in Europe, it had changed and had already seen significant improvements in the number of jobs? If he could accept that, we could at least view his arguments in a balanced way. [Interruption.]

Mr. Deputy Speaker: Order. We must not have shouting from sedentary positions when a Member is making an intervention.

Rob Marris: I will go so far as to say that some economic indicators, including falling unemployment, were positive on 1 May 1997. However, the suggestion that at that point the United Kingdom was somehow the economic powerhouse of the European Unionor the most powerful economywould be questioned by 60 million west Germans, and probably 80 million Germans. I stand to be corrected, but many people would agree, without picking any other examples, that the German economy in May 1997 was stronger than ours. Our economy now is stronger than the German economybecause our economy has come up, not because the German economy has come down.
	We have been talking about productivity and I very much welcome the statement on page 15 of the Budget 2006 Budget Notes, dated 22 March, in relation to amendments to research and development tax relief schemes. It is important to companies in the west midlands and, I hope, to all right hon. and hon. Members, to encourage more research and development and consequently, one hopes, investment in our economy. Paragraph 2 states:
	In line with a key recommendation of the Cox review
	I do not know who Cox was
	the Government intends to provide additional support to firms with between 250 and 500 employees through RD tax credits, subject to the outcome of state aid discussions with the European Commission.
	That is extremely helpful. In previous years, the Government have gradually extended the scope and amount of R and D tax credits, which has not yet had as positive an effect as one would hope, but it is having a positive effect. R and D is creeping up, I would like it to increase further and that segment of companies with between 250 and 500 employees could be a real driver of that increase. I hope that that helps manufacturing around the country, especially in the west midlands.
	To move on to the green agenda, I declare an interest as a member of Greenpeace since, I think, 1975. I have a feeling that I am also a member of Friends of the Earth. I will declare that because I think I am a member, although I am not sure.
	I am pleased that the Government introduced, and are sticking with, the climate change levy. I am saddened that the Conservative Opposition seem still to be wobbling about it. In fact, as far as I can tellperhaps a Conservative Member will elucidatethey seem still to be against it. Despite difficulties in what might be called the fine print, I think that it has had a positive effect.
	The right hon. Member for West Dorset (Mr.   Letwin), the former shadow Chancellor, said in January that the climate change levy had not been a success. That followed his statement in July 2000:
	We regard the climate change levy as an aberration that should never have been brought before Parliament.[Official Report, 18 July 2000; Vol. 354, c. 322.]
	He was very clear about that. I think that he was also very wrong, and I urge the Government to stick with the climate change levy. It is a pity, however, that there has been no change in airport passenger duty. I think that we should continue to push within the European Union for some kind of excise duty and also duty on aviation fuel.

Adam Afriyie: I thought that I had better intervene before the hon. Gentleman stampeded over his own Government's policies. The Government's energy review is currently under way. I am stunned that they have already concluded that the climate change levy should remain, although the review has not been completed.

Rob Marris: The climate change levy is in place and it is accepted by many commentators, although perhaps not by the hon. Gentleman, that it has had a positive effect. There may be individuals, and the hon. Gentleman may be one of them, who think that the positive effect has not been sufficient to outweigh the negatives, but I think that it has had a positive effect and so do my Government. It is possible that the energy review will come up with a better way of achieving the objectives, but for the moment the Governmentrightly, in my vieware sticking with the climate change levy, which many of us think has worked.
	On green issues, I welcome the creation of the national institute of energy technologies, which will be in partnership with the private sector. According to page 151 of the Red Book, its purpose will beunfortunately this includes a split infinitive
	to better leverage the substantial public sector funding of energy research.
	I think that that is very good.

David Heath: It is 10 years too late.

Rob Marris: Well, we are doing it. I would have liked it to be done earlier. I wish that Governments of all political colours had taken energy issues a little more seriously, particularly the issue of so-called alternative energy sources. However, we are doing it, and that is the mark of a Government who are listening and prepared to act.

Graham Stuart: The Government set clear targets. They accepted targets under Kyoto, although it is questionable whether the country will meet those minimal targets. No commentator thinks that there is any chance that the country will meet the target of a 20 per cent. reduction in 1990 levels of carbon dioxide. Does the hon. Gentleman agree that the smallif, in environmental terms, arguably positiverole played by the climate change levy should not be used to excuse the Government's failure to lead a major campaign on energy efficiency, to listen to the various reports of the Environmental Audit Committee and others over the years, and to transform the country's performance? If this is the biggest issue facing the world today, why have the Government failed so completely, and why do Friends of the Earth say that today's Budget statement will do nothing to tackle the challenges that we face?

Rob Marris: Every little helps, which is why the Chancellor has announced what I hope is an initial fund of 50 million for microgeneration. That is how it works with energy: every little bit helps, whether people are driving fewer miles and cycling more, whether we have microgeneration, or whether we have a few more windmills. Hon. Members need to grasp that we are talking about a whole mosaic of measures. Any one measure will not sort everything out; we need an array of measures. That is what the Government are providing and what the Budget has provided.
	Investment in energy efficiency for buildings, both business buildings and homes, is part of that array of measures. We have buildingsthis applies, I have to say, to parts of this buildingthat are leaking energy all the time. Lights are left on, and there is insufficient insulation. We as a society need to invest in energy efficiency in the public sector, in the private sector and in our own homes. We are starting to do so and yes, I wish that we had done more earlier, but one has to have priorities in government and they were sorting out schools and the NHS, economic growth and so on. We have done pretty well on those and now we are moving on to energy matters.

Graham Stuart: rose

Rob Marris: I will not give way because I must make some progress; I hope that the hon. Gentleman will forgive me.
	One area where the Chancellor has made some progress in this Budget, although not nearly enough, is vehicle excise duty. There is a new band for vehicles emitting more than 225 g per kilometre of carbon dioxide, the duty for which will be 210. As I say, that is not nearly enough. In, for example, two to three years time, we should introduce a swingeing regime for such vehicles, although I stress that it ought to apply only to newly purchased ones. At one end of the spectrum is the Toyota Prius, which produces 104 g of CO 2 per kilometre. At the other is the Lamborghini Diablo, which produces 520 g. A Ferrari 575 Superamerica produces 499 g. I am not an expert on cars, but I suspect that the Ferrari carries only two people. A Toyota Prius carries five people and a Toyota Aygo, which produces 109 g of CO 2 per kilometre, carries at least four and may even carry five, although I do not know whether it has five seatbelts. One of the Maseratis produces, I think, 525 g of CO 2 per kilometre. We should have swingeing taxes on such vehicles.

Richard Younger-Ross: I hate to disillusion the hon. Gentleman, but someone who can afford a Lamborghini Diablo is unlikely to be put off by the rate of duty, whatever it may be. People in rural areas who use four-wheel drive vehicles will be hit by this new band, particularly struggling farmers. Under the proposal, they will pay more even though many such people are on very low incomes. Does the hon. Gentleman agree that the Chancellor needs to look at providing extra relief, so that those for whom the use of four-wheel drive vehicles is essentialI am not talking about non-essential useare not penalised?

Rob Marris: I am not an expert on rural areasit may not surprise the hon. Gentleman to learn that in my constituency, periodically there are a maximum of 35 sheep on one very small part-time farmbut so far as I am aware, those for whom the use of 4x4s is essential, such as farmers, purchase red diesel, which is written off for tax purposes as a business expense. The Chancellor may be considering such a rural adjustmentI would not rule it outbut it is not a reason to back off from swingeing increases. I think that the hon. Gentleman broadly supports the direction of travel, to use the modern vernacular, of the swingeing increases that I am proposing.

Richard Younger-Ross: indicated assent.

Rob Marris: The hon. Gentleman said that such a rate of duty would not bother the owner of a Lamborghini Diablo, but it depends how swingeing it is. I am not seriously suggesting that it should be, say, 80,000 if the car in question is rated above 500 g. However, a duty of 1,000 to 2,000 would affect the resale value of some of these vehiclesperhaps not very fancy sports cars such as Ferrarisand that might influence people when they consider purchasing them. A Range Rover 4.4 V8which is made in the west midlands by Ford, of courseproduces 389 g of CO 2 per kilometre. That is a ridiculous figure. I suspect that few farmers use a Range Rover 4.4 V8 for anything other than taking their daughter to the gymkhana. Instead of introducing a rate of 210, the Chancellor should have opted for a considerably higher one.
	I was going to discuss globalisation, but I shall leave that to others as I have detained the House for long enough.

Alan Simpson: I welcome the points that my hon. Friend is making about vehicles that are far more efficient in terms of reduced carbon emissions, but does he recognise that Britain also needs to play catch-up with other parts of Europe? France and Italy have already developed prototypes of vehicles that run on compressed air, which are capable of doing more than 100 miles to the tank and more than 100 km per hour. Does he agree that there needs to be a paradigm shift in how we think about low-impact transport? A punitive approach to what happens now is not enoughwe need to be proactive in transforming our thinking about making lighter the footprint that our transport needs leave on the planet.

Rob Marris: My hon. Friend is absolutely right, but the Chancellor cannot use VED directly to introduce compressed-air cars, or whatever. What he can do is use R and D tax credits to that end, as I have mentioned. The UK is a world leader in automotive design, and although British-owned companies may not be great at building cars, our car industry is very big.
	I think that Formula 1 lies at the rather silly end of the spectrum but, although it uses a lot fuel, it also produces a lot of technological development. I hope that some British companies are developing techniques involving stuff like compressed air, hybrid engines and hydrogen. That is going on in other parts of the world and I hope that the R and D tax credits will help.
	In conclusion, the Government have been in power for nine years, during which time we have moved to what many people recognise is a more Scandinavian model of society. Britain is now more generous and tolerant than it used to be. True, people pay higher taxes for better public services, but I, for one, believe that that is a jolly good thing. The pot is not limitless and taxes cannot go on rising forever, but the increase in employment means that more people now pay taxeven though, as my right hon. Friend the Chancellor pointed out, tax credits and other provisions mean that some do not pay the full net amount.
	Today's announcement of free national off-peak bus travel for pensioners was slipped in near the end of the Budget speech and is a fantastic measure. It will improve the quality of people's lives, which should be one of the purposes of any Budget. A huge amount of new money is to go into education, and I was especially pleased with what my right hon. Friend the Chancellor said about further education, although I wish that we could do more to fund adult courses for those who have gone beyond level 2. I know that my hon. Friend the Economic Secretary takes a special interest in FE, but the Budget will make a difference in all the matters that we talk abouteducation, skills and giving every child a chance. It is designed for the future and as a way to help the young people who will look after us in our old age.
	I salute what the Chancellor has done today, especially in respect of people-centred policies and education and skills.

Peter Viggers: It is a truism in Treasury circles that it is very difficult to work out at first hearing the true shape of a Budget, but this Budget is more difficult than most. With this Chancellor, of course, one has to wade through the glutinous self-congratulation with which he always surrounds himself before one can work out what he has actually done.
	One thing is already clearthat the expenditure that he has announced is enormous, and that borrowings will be vast. Over the next few days, the provenance of that borrowing and how the money will be raised will be the subject of much scrutiny. The hon. Member for Wolverhampton, South-West (Rob Marris) mentioned PFI schemes, and said that any such approach in the hospital and NHS sector would be an investment. I do not agree: the original idea behind PFI was created some years ago by the previous Conservative Government to bring the skills of the private sector into investment. This Government have lost the thread in respect of PFIs, and instead use such schemes purely for the purposes of off-balance sheet accounting.
	One of the first things that one learns in the Treasury is that it does not distinguish between capital and income. A lot of work remains to be done before we know exactly where this Budget will lead us. However, I believe that this Chancellor has done three things righthe has not joined the euro, he has created the Monetary Policy Committee to control interest and inflation rates, and for a couple of years he followed the guidelines set out by the former Chancellor, my right hon. and learned Friend the Member for Rushcliffe (Mr. Clarke).
	The announcement that the Chancellor made today about giving some measure of independence to the Office for National Statistics may need to be added to the list of the three things that he has done right. In future years, I may well admit that he has done four things right. However, I maintain that he has done everything else wrong. How can that be? He has done it wrong because he is a socialist, his basic philosophy is flawed and he cannot resist social engineering. He does not understand business at all.
	Does that matter? I will tell hon. Members a short story. I saw a cartoon once that showed two Egyptians in the desert looking at an architectural drawing of a pyramid. One Egyptian was saying to the other, I know it may exactly agree with the plans, but I've got a funny feeling that there's something wrong with it somehow. What is wrong is that the pyramid is standing on its apexit is upside down. We can think of the whole of the top of that upside-down pyramidthat huge structureas being the non-productive parts of the economy. Those parts may be very valuable, and the people may be nice people doing useful jobs, but they are not productive. I am talking about all pensioners, all children, the armed forces, the civil service, Members of Parliamentall non-productive. At the apexthe tiny triangle at the very bottom of the pyramidare the people who are actually producing for this country. Those are the areas in the private sector. The private sector should be cherished. It is crucial, unique and essential. The present Chancellor of the Exchequer and the present Government do not understand the need to cherish the private sector.

Ivan Lewis: Will the hon. Gentleman confirm that he just said that the armed forces and the civil service, per se, are not productive? Will he confirm that the business community said for years that the one thing that it wanted more than anything else was a stable environment in which to do business? Is it not true that this Government have created the most stable year-on-year environment almost in the history of our economy?

Peter Viggers: I will not allow the Minister to put me in the position of criticising the armed forces.

David Taylor: You started it.

Peter Viggers: Absolutely not. I yield to no one in my admiration for the armed forces, in which I have served, unlike most members of the Government. The fact is that the armed forces are not producing an extra benefitthey are not creating wealth for this country. All the people who are serving with great courage in Iraq and elsewhere are not producing wealth for the country. That is the critical point.

Kevan Jones: I am listening very carefully to the hon. Gentleman. Is he really saying that if a part of the economy is not productive, it does not make any contribution? I have to totally disagree with him in terms of the armed forces. Surely by trying to protect the security situation in different parts of the world, they are helping the economy not just of this country, but of the parts of the world in which they are serving?

Peter Viggers: My pointI am sure that the hon. Gentleman will try to drive me away from it, but I will not let that happenis that it is the private sector that enhances the wealth of this country, which other sectors do not do. One simply cannot say that service sectors, or those working for the Government, are enhancing and increasing public wealth.

Several hon. Members: rose

Peter Viggers: I will not give way again, because the point is quite clear. Some Members may not like it, but the fact is that the private sector enhances the wealth of the nation, which other parts of the economy do not do in the same way. This Government and this Chancellor of the Exchequer have done the opposite of cherishing the private sector. That is not surprising, I suppose: they are an array of barristers, lecturers, social workers, research assistants, charity workers and a Marxist lecturer, who, of course, is at defence. They have all been dependent on the state and the public sector all their lives.

Ivan Lewis: He just insulted charity workers.

Peter Viggers: Dependency is the key to this Government's[Interruption.]

Mr. Deputy Speaker: Order. We must not have these comments from a sedentary position, which do not contribute to the debate at all.

Peter Viggers: Labour Members may not like the points that I am making, but they are true. The Conservatives recognise the unique significance of the private sector, whereas the Government are united in the belief that socialism and the public sector can solve every problem.

Rob Marris: Will the hon. Gentleman give way?

Peter Viggers: No, I will not give way.
	Under this Government, regulation and controls have increased. The size of the public sector has increased dramatically and many of my constituents point out that the advertisements for public sector jobs are offensiveincluding obesity advisers and five-a-day co-ordinators. The jobs section of The Guardian paints a very sad picture of the way in which public money is being spent, not all of it wisely.

Ivan Lewis: Will the hon. Gentleman clarify his remarks? Does he value in any way the contribution that public services make to the well-being of our society and the strength of our economy? He attacked a range of people and said that we were a collection of charity workers, as though working for a charity is making a negative contribution to society. Whom does he value in our society?

Peter Viggers: I understand why the Minister is trying to blow me off the point, but the fact remains that there is a complete difference between those who do not enhance the wealth of the country and those who do. That does not mean that those in the non-wealth producing sector are less valuable as individuals. Of course they are not. To say so would be to talk down ourselves, nurses, doctors, the armed forces and teachers, all of whom are among the most worthy people in our community, but they are not the wealth-creating members of it. The Minister and his colleagues are proving my point and demonstrating that they do not accept that there is a special virtue in the wealth-creating part of the economy. I shall move on.
	Under this Government, the tax burden, excluding North sea oil revenues, will be 37.6 per cent. of GDP this year, 37.8 per cent. next year and 38.1 per cent. the following year, which will be the highest rate ever for taxation. Yes, there were 83 per cent. income tax rates under previous Labour Governments, but that does not mean that the rate of taxation overall then was higher than the rate of taxation now. We are being taxed on taxed income. The Cardiff Business School says that as a result a basic rate taxpayer is paying 48.50 per 100 of income in tax and a higher rate taxpayer is paying 57.10 per 100 of income. Each individual receives an income, on which he pays income tax and national insurance. With the net amount of his taxed income, he then pays sales taxes, VAT, fuel duty and excise duties. Out of his taxed income, he also has to pay fixed charges such as the council tax and television licence. Eventually, if he prospers sufficiently, his next of kin will pay inheritance tax of 40 per cent. on his estate. We are taxed on taxed income, and that is why the tax rates are so high.
	High tax rates bring their own problems. We have heard reference to the Chancellor's impost on pension funds, and I have declared an interest in relation to pension funds. He taxed pension funds some 5 billion a yearI expect that he would maintain that it is 3 billion netin his first Budget in 1997, and that has led indirectly, and together with other factors, such as increased longevity and the weakness of the stock exchange, to the closure of final salary schemes and the crisis in the pensions industry. The Chancellor causedor, at least, contributed tothat problem.
	Similarly, the increased taxes of 6 billion on North sea oil will, in due course, lead to higher prices at the petrol pump. During evidence to the Treasury Committee, the Chancellor denied that his duty on North sea oil will have the direct result of higher prices at the petrol pump, but it is true. His taxation of pension funds has affected pensions, and his taxation of North sea oil will affect petrol prices. The Chancellor does not actually believe that his increased taxation will have an impact on petrol prices at the pump or on pensions; he does not realise the implications of his actions.
	The Chancellor is guilty not only of high taxation, but also of fiddlinghe loves fiddling with people's lives. The tax credit system, which is much vaunted by the Labour Government, has done enormous damage, as well as good. The Government do not realise that although a family in modest circumstances will be grateful for a tax credit of 500 or 1,000, if the Government try to take back that amount it causes a major crisis in the family. The benefit of giving families money is far outweighed by the damage done when the Government try to recover it.

Graham Stuart: Is my hon. Friend aware that due to the failure to implement the tax credit system, some of my constituents had to rely on handouts of food parcels from citizens advice bureau staff[Interruption.] Labour Members say that is not true. If the Minister would like to visit my constituency, I will introduce him to the CAB staff who were carrying food parcels in the backs of their cars as a direct result of the Government's failure to implement the system[Interruption.]

Mr. Deputy Speaker: Order. We cannot have this. If the Minister wants to intervene, he must stand at the Dispatch Box and intervene in the normal way. We must not have continued comments from a sedentary position.

Peter Viggers: I am not surprised that the Government do not like what I am saying.
	It is quite difficult to obtain statistics about tax credits and of course statistics have a tendency to go both ways. The Treasury Committee has been carrying out an inquiry into tax credits.

Edward Miliband: Will the hon. Gentleman give way?

Peter Viggers: Not at the moment.
	At a Sure Start centre in my constituency, I talked to the 20 young mothers who were there. I asked how many of them had had some dealings with the tax credit system and all 20 put up their hand. Then I asked how many of them had had a problem with tax credits and 14 put up their hand. The Minister finds that amusing, but 14 of the 20 said that they had had problems with tax credits. In discussion, it became clear that my suspicion was true: the damage done when money is clawed back from families on modest incomes

Edward Miliband: Will the hon. Gentleman give way?

Peter Viggers: I shall certainly not give way to the hon. Gentleman, who has only just entered the Chamber.
	The damage done by clawing back money is far greater than the benefit that was originally given. The Government simply do not understand the strain and difficulty that that causes.

Ivan Lewis: Will the hon. Gentleman give way?

Peter Viggers: No, I want to move on to the Budget judgmentthe hand on the tiller. What is the Chancellor's judgment, as seen in the Budget?
	The Chancellor should be judged not by his own assessment but by the assessment of others. I have looked at assessments made by the International Monetary Fund, the Organisation for Economic Co-operation and Development and the European Commission of the current state of the UK economy. Paragraph 14 of the European Commission's assessment, on 22 Februarybefore the Budget of coursestates that it would be appropriate for United Kingdom to
	ensure that the deficit is brought below 3% of GDP by 2006/07 at the latest in a credible and sustainable manner.
	Paragraph 9 warns:
	Given existing policy commitments, reducing the expenditure to GDP ratio implies significantly slower current expenditure growth, probably particularly marked in some areas.
	The European Commission is warning that it will be difficult for the UK Government to return within the 3 per cent. limit. The Chancellor has done the opposite in his Budget. He appears to have decided to spend and to borrowthe very opposite of what the European Commission recommended.
	To refer again to the European Commission document, paragraph 7 says of the UK economy:
	The primary balance, estimated as a deficit of 1 per cent. of GDP in 2005/06, returns to balance in 2008/09 and reaches a surplus of  per cent. of GDP by 2010/11. The improvement in the nominal balance is mainly driven by a pick-up of revenues, partly due to the projected cyclical recovery of the economy.
	That refers to an absolutely classical economist's J-turn. The European Commission is saying that the situation in the United Kingdom will get a little worse, but it will get bettera typical J-curve.
	The Chancellor, having been warned that he will come very close to the 3 per cent. limitin fact, he is over it in certain wayshas taken the opposite view and decided to expand expenditure. He recognises that there are problems, but he has decided to trade his way out of them. It is certain that there will be curbs on expenditure, of which we heard nothing in the Budget, and that there will be higher taxation, which is inevitable, and that that will lead to lower productivity.
	Under this Government, we have already fallen from fourth to 13th in the authoritative world productivity table produced by the World Economic Forum. We cannot afford to lose out in the productivity table; we need to consider the competition. Let us look just at China. In China, 26 cities are installing underground railways. China wants to build 50,000 miles of three-lane highway in five yearsthat is the same size as the American highway network, which took 40 years to buildand it is building 30 nuclear power stations. The competition is ferocious; we should be facing up to itinstead, with this Chancellor, we have more tinkering, more micro-management, more promises and more taxation: more of the same, and it will not help.

John McDonnell: I clearly welcome much of what the Chancellor has said today about investment in public services and the development of a stable economic growth path. The Chancellor set the scene by referring to the economy's fundamentals and the balance between borrowing and taxation, which has been often mentioned in the debate so far, and competitiveness and elements of equity in the distribution of resources in the economy. I am grateful to him for that, because it was an excellent way to set up the debate for the next few days.
	There are important factors to take into account in describing Britain in 2006 and in the economic policies that the Government must address. I want to set the scene somewhat differently by describing other elements in the equation that depict life in Britain today and that need to be addressed. I suggest that the 2006 Budget must place as much priority on addressing those issues as on those identified by the Chancellor in his macro-economic display today.
	The Chancellor set his scene by describing Britain as viewed from the Treasury, the Bank of England, the City and, in my opinion, slightly too much as viewed from the CBI conference hall, but I want to describe Britain as we see it on the streets and in our communitiesindeed, the Britain that virtually every Member of Parliament witnesses in their weekly advice surgeries and in the daily volume of their correspondence. Those are the institutions and people whom we meet, and those are the issues and the challenges that we face as MPs in our constituencies.
	I regret that the Budget did not contain some measures that I would have welcomed today, as they have been debated for a considerable time not only in the Labour party, in particular, but across the country. I should like to outline some of those measures, and perhaps we can enter into a discussion in the coming months about how we can address them. I congratulate the Chancellor on the undoubted progress that has been made in lifting the poorest pensioners out of poverty, but we must bear in mind the fact that, first, pensioner incomes remain relatively low, with annual assaults, particularly from energy and fuel charges, on those limited incomes. The basic state pension stands at only 15.6 per cent. of the average wage at the moment.
	Secondly, the Chancellor's strategy has increased the proportion of pensioners on means-tested benefits to just over 50 per cent, but each year 1 billion is unclaimed. I accept what my hon. Friends have said, and I have been working with the Pension Service in my constituency to try to ensure that benefits are claimed. I pay tribute to the Pension Service for its work on the ground. I also pay tribute to the support it has had from the Public and Commercial Services Union. Advice has been given and there has been co-operation with the union, and the service has worked with the union towards flexible working on the ground.
	The Budget does not address restoring the link with earnings, which was recommended in the Turner report. Pensioners thus will still fail to share automatically in the growth and wealth of the country and the benefits of the Chancellor's policies on economic stability and growth. My straightforward recommendation is that we raise the basic state pension to the guaranteed credit level and restore the link with earnings. Unlike other hon. Members, I do not have a calculator that runs to trillions, but House of Commons Library figures suggest that my recommendation would cost 7.3 billion, which would be a fairly minimal sum to lift a large number of pensioners out of poverty and enable them to share the future wealth of the country.

Rob Marris: Is my hon. Friend aware that, according to the Department for Work and Pensions, pension tax relief has almost no effect on people's savings for pensions because they would save anyway. Almost all the tax relief goes to the wealthiest in our society, and it represents 18 billion a year of forgone tax revenue, which might go some way towards paying the 7.3 billion for his modest proposal.

John McDonnell: I am dealing with expenditure at the moment, but I will talk about the income needed to resolve these matters in due course. It has become an annual event that we prepare an alternative Budget on behalf of Labour representation in the socialist Campaign group and the left economic advisory panel, which is our shadow form of the Bank of England advisory committee. I want to outline several proposals that the Government might wish to consider in due course. The Government took up a number of the issues that we raised in previous alternative Budgets.

Rob Marris: We have a listening Government.

John McDonnell: A listening Government, but they are perhaps not as attentive as possible.

Brooks Newmark: I would like to lend the hon. Gentleman my support, as would members of the Braintree pensioners action group. It is important that we re-establish the link between pensions and earnings. What is the hon. Gentleman's view on abolishing means-testing completely, which the Chancellor promised back in 1993?

John McDonnell: There has been a long debate about means-testing over the past 60 years. Any Government will have to ration resources in some way. The best book to read on the matter was produced by Enoch Powell in the 1960s. It addressed health and welfare benefit reform. The language of Bevan is about socialism and the language of priorities, and Enoch Powell demonstrated in his own terms that there will always be a need for any Government to have some form of means-testing, but our job in a civilised society is to try to minimise it. I am grateful for the hon. Gentleman's support, but given his past calculations I am wary of his mathematical ability on such matters.
	Individual Members of Parliament must address elderly care. The main worry for many pensioners, apart from their income, is what will happen to them if they need care. They fear losing their homes to pay for such care, and the problem has been graphically highlighted by recent television programmes. In addition to restoring the link with earnings, the Government should thus consider abolishing all care charges, which, according to House of Commons Library figures, would cost 4 billion. That would give pensioners security in the future, but we should go further and consider again the high prescription charges that are levelled against pensioners and others. Abolishing prescription charges would cost the relatively minimal amount of 0.42 billion.

Rob Marris: That is 420 million.

John McDonnell: Yes. I did not mean to confuse my hon. Friend, who is attentive on all such matters.
	At the other end of the age spectrum, we must also applaud the impact of the Chancellor's policies on reducing child poverty. However, we need to acknowledge that the Government have missed their target of taking a quarter of all children out of child poverty. They have managed to do that for 17 per cent. of children, but we have missed our target on the time scale that we set. That is not to carp. To get this far is a major achievement. However, we have missed our target by 250,000, and those children remain in poverty.
	The definition of poverty is extremely limited. Many children living on the margins of what is defined as poverty do not enjoy the lifestyle that we would want for our own children. That is just an aside; I accept that we need commonly agreed mechanisms by which we measure poverty, but we also have to accept that the definition sets a relatively low target.
	There is also the problem of non take-up of means-tested tax credits, high marginal tax rates and disincentives to work, which are associated with all means tests. We have debated that. It is why I propose a simple solution to tackle the failure to meet the full 25 per cent. target. A 5 increase a week on child benefit would cost 3.4 billion. According to Treasury figures, it would initially lift 350,000 children out of poverty.
	For young people, my continuing concern is that introducing tuition fees and scrapping maintenance grants has depressed a generation with the prospect of starting adult life with high levels of debt. Tuition fees also serve as a disincentive to study, and I worry about the drop-out rates from some of our colleges and universities, which in some instances has reached 25 per cent. For that reason, we need dramatic and radical action to restore confidence among our young people in staying on, especially young people from working-class backgrounds. Hence I propose wiping out all student debt at a cost of 8 billion and scrapping tuition fees at a cost of 2.25 billion, wiping the slate clean of an overhang from past policy mistakes.
	Despite all the Government's successes in investing on a large scale in public services, there has been a failure to recognise the significance of the impact of poor housing and lack of housing on the poverty and quality of life of many of our constituents. When I was elected in 1997, 40,000 families were homeless in London. There are now 50,000. A large number of my constituents suffer from terrible overcrowding and insecure accommodation, and they are living in abysmal housing conditions.

David Taylor: It is a real pleasure to hear the second shadow Chancellor outline the Budget that we may hear in years to come.
	On housing, does my hon. Friend agree that two things would have been welcomed had they been announced today? The first is the restoration to local authorities of the power to build or acquire affordable housing. The second is to fund properly an option 4, which would allow local authorities that were good landlords to have their tenants stay with them, rather than being coerced away into stock transfers, PFIs and other dubious vehicles.

John McDonnell: I shall move on to that proposed solution in due course. However, I think that all hon. Members consider housing to be a critical issue that the Government need to address. Poor housing conditions, overcrowding and homelessness impact on all aspects of the lives of our constituents. They impact on their health, the educational abilities of their children and their overall environment.
	Recent Government statistics show that more than 100,000 families live in temporary accommodation, and the figure has doubled since 1996; 2.4 million of our homes are below the decent homes standard; 1.5 million people are on council housing lists; and 2 million households containing pensioners, children or someone with a long-term sickness or disability live in fuel poverty. Society overall, not just the Government, should be ashamed of those statistics.

Brooks Newmark: Does the hon. Gentleman think that part of the problem with homelessness, particularly in many of our cities, relates to mental health care and that many homeless people have mental health problems? Surely we should be investing much more in mental health care so that we can treat those who are homeless and have mental health problems.

John McDonnell: Mental health care issues clearly impact on homelessness. I have some involvement in dealing with those matters in my constituency. I compliment the Government, because for the first time in a long time we have had significant investment in mental health care in my area. The hon. Member for Uxbridge (Mr. Randall) and I have opened new units in our constituencies. However, the key issue is not mental health but housing supply, repair and renovation. Unless we have a significant housing programme, we will not be able to tackle such matters, and they will have an impactwhether on mental health, families in poverty or children trying to get a decent education.
	In response to a recent parliamentary question, the Minister for Housing and Planning said that it would cost 7 billion to bring all local authority homes up to the Government's decency standard. That would represent one of the best and wisest investments that the Government could make in tackling the housing nightmare that so many of our constituents daily face.
	The Chancellor of the Exchequer today announced a new housing programme, which I welcome, but I have to say that it is not on a scale that will tackle the size of the need or the desperation. I urge hon. Members to examine the Shelter housing programme, which sets out the targets that the Government should be meeting year on year to tackle the plight in which many of our constituents find themselves.
	To return to the point made by my hon. Friend the Member for North-West Leicestershire (David Taylor), success in delivery of housing improvements and building programmes can be achieved only if the Government work in partnership with local authorities, adopt the Labour party conference option 4 policy, end the discrimination against local authorities and invest directly in a large-scale council house building programme. I can find no other vehicle that could undertake the scale of investment and delivery that we need in this housing crisis.
	Finally, on the expenditure side of my Budget equation, I suggest that the Government acknowledge the 800 million deficit that the NHS is facing. My primary care trust is facing a deficit of 30 million, which is unmanageable. No matter how good the management, we will not be able to tackle that in the next 12 months. It is clear from my experience that that has arisen from the rigidity and dominance of the national target setting approach to service improvement, which has undermined local management and local decision making. Therefore, central Government need to review not only local management but the central Government role. In addition, we need to recognise that the 800 million gap is not bridgeable in one year. My proposal would be to write it off and to allow the PCTs to start again in partnership with central Government.
	The sum total of those Budget proposals is about 35.37 billion, give or take the odd 100 million. I mention that because my hon. Friend the Member for Wolverhampton, South-West (Rob Marris) intervened on me last year to see whether the addition was correctI hope it was.
	Turning briefly to how we should raise the revenue to fund this programme, I welcome today's statements by the Chancellor of the Exchequer that we will start looking at tax avoidance. I regret that in the merger of the Inland Revenue and Customs we lost 3,000 staff, but I compliment the new department's work on corporate tax avoidance. Let us consider the proposal made by the Tax Justice Network. Corporate tax avoidance on a scale of 9.2 billion could be tackled, and could reap an income to be invested in the future of public services and in reducing poverty.
	I am delighted that a number of years ago the Chancellor introduced windfall taxes to tackle obscene profits in certain sectors of the economy. I urge him to revisit that policy and look at two particular proposals. First, a windfall tax could be imposed on the bonuses given before Christmas to many people who work in the City. We have heard that the stock market is having a difficult year, but national account data show that output in the financial sector has recently increased by 5 per cent. year on year. It is just shy of the 5.3 per cent. that is the highest recorded increase since the 1990 boom under the Lamont chancellorship. The bonus pool for investment bankers is estimated to be 7.5 billion, and some of those profits were distributed before Christmas on a scale not previously seen. Indeed, it is believed that 3,000 mangers could receive a 1 million handout. A windfall tax on 50 per cent. of a City bonus is therefore justified, and would bring in 3.75 billion.
	Secondly, we must look at banks and oil, and we could impose a windfall tax on the incredible profits that energy companies have reaped recently. BP, for instance, had a profit of 11 billion or 25 per cent; Shell, 30 per cent.; and Centrica, 11 per cent. Of the banks, Barclays had a profit of 5.28 billion or 15 per cent.; Lloyds TSB, 10 per cent.; and the Royal Bank of Scotland, 21 per cent. The Chancellor has introduced windfall taxes before, and he should do so again on the same scale. The level of profits that triggered the previous windfall tax has been exceeded by those companies, and a new windfall tax could bring in 6.10 billion.

David Taylor: In his list of areas of the economy where unjustified profits have been made, will my hon. Friend consider including companies such as Laing, which is the midwife to many private finance initiative projects? Ten days or so ago, it announced that its so-called PFI investment quintupled in a relatively short period and that its profits had increased by 43 per cent. The income stream that it received from those projects was twice the base rate, so it is no wonder that 60 acute NHS trusts, to which he has referred, have commitments to PFI payments that exceed 10 per cent. of their revenue. Does he not agree that that is only going to get worse?

John McDonnell: I regret that the Chancellor appears to have launched a new PFI initiative.

David Taylor: It will cost 26 million.

John McDonnell: That is a significant roll-out of PFI. In the past, PFI schemes have wasted resources, and companies have been guilty of exploitation. In many cases, they did not deliver the goods or provide the public services required. We all have experience of such projects in our constituencies. In my own constituency, a new PFI school was imposed on us. Every year, the school has a deficit that it must make up. Jarvis was the PFI contractor, so when it was threatened with bankruptcy we had to set up a telephone tree in case we had to occupy the school to prevent the company from removing goods. In addition, kids in the local community cannot afford most of the sports facilities provided at the school via Jarvis, so the facilities stand idle.

Alan Simpson: Does my hon. Friend accept that his constituency was not alone in being saddled with problems after projects were administered by Jarvis? Will he confirm that in the year when the company's share price has collapsed it paid its executives a bonus of 807,000, which appears to be a reward for failure?

John McDonnell: There are numerous examples. I refer hon. Members to the work of Alison Pollock and to the publications by Unison in recent months, which contain example after example in the public services, health and education where PFI has been used to exploit the public purse, has failed to deliver and has delivered large bonuses and profits to individual company directors. That is why I regret that the Chancellor is going along that line. I would welcome a Government inquiry into PFI, which would probably echo the work done by the Public Accounts Committee on individual PFI schemes, which has demonstrated their lack of deliverability and cost effectiveness.
	To balance our books, I refer to what was Labour party policythat we should reduce our defence expenditure to European Union average levels. That would bring in 6.3 billion. In line with my views, which are shared by a large number of colleagues, withdrawal from Afghanistan and Iraq would produce 1.3 billion.
	On income tax, we must consider the restoration of higher income tax levels for those earning more than 60,000, graded up to 100,000 and above. Figures produced by the House of Commons and recommendations from the left economic advisory panel suggest that we could have an income tax take of an additional 11.2 billion.
	Overall, that would provide us with an expenditure of 35.37 billion and an income of 37.85 billion. Some of that expenditure would be one-off. The gap between one-off expenditure and ongoing income is about 9 billion. I refer to the proposals made by others to build on the Chancellor's message today that we need a huge investment in an environmental programme to ensure sustainability and tackle climate change.
	I regret that today we have not made progress on aviation tax. I accept that there are constraints arising from international agreements, but, as we have demonstrated in previous debates in the House, that does not prevent us from moving on with regard to UK fuel duty and it does not prevent us from increasing passenger duty. I know that my hon. Friend the Member for Nottingham, South (Alan Simpson) has ingenious ideas for controlling emissions through levies on emissions at particular airports. That is one way in which we can increase duties overall, which will enable us to launch a comprehensive programme to investigate wind power, solar power, marine power, renewables, biofuels and waste minimisation. It will also provide a significant injection of cash for investment in our public transport system.
	The Chancellor of the Exchequer referred today to the need to control public sector pay. I wish as much attention was paid to the private sector, especially the City. If attention is to be paid to public sector pay, let us consider some of the levels of pay that public servants receive, which raise the issue of poverty pay. Let me give some examples. For an administrative assistant in the Department for Work and Pensions, the starting salary,   which many people are on because there is high   turnover, is 11,750. In the Department for International Development, it is 10,947. When we increased the minimum wage last time, we discovered that some of our own staff were on the minimum wage. In the Ministry of Defence the starting salary for an administrative assistant is 11,220.
	Many of those jobs are based in London. I do not know how people survive on such salaries in city areas. If we are to look into public sector pay, it should not just be in terms of restraint. We need to develop Government policies for coherence in national negotiations and tackle low pay. We must recognise that many of those people are dedicated public servants, without whom we would not be able to deliver our policies or the Budget.

Michael Fallon: I remind the House of the business interests that I have declared in the register.
	I hope that the hon. Member for Hayes and Harlington (John McDonnell) will forgive me if I do not respond in detail to the alternative Budget that he has presented. He was honest enough to attach prices to some of his programmes, although I am afraid that my calculator overheated, so I shall leave it to the Economic Secretary to respond in detail. However, I shall make one point: he has said that he is against privatisation, but if he looks at table C4 in the Red Book, he will see that the spending programme that the Chancellor is currently planning depends on some 35 billion of privatisation7 billion a year over the next five years.

David Taylor: Those are asset sales.

Michael Fallon: The hon. Gentleman calls them asset sales, but taxes are called charges for the same reason. The programme involves privatisation, and Qinetiq was the first of it. I wonder whether the hon. Member for Hayes and Harlington will troop through the Lobby in due course in favour of it.

John McDonnell: There are a series of proposals in today's Budget that are asset sales, and I expect the Chancellor of the Exchequer to introduce individual pieces of legislation on them. If the hon. Gentleman checks the record on issues such as the sale of air traffic control, he will find that I have opposed each privatisation.

Michael Fallon: I do not doubt that, and I was half implying that I expect to see the hon. Gentleman rebel again. I do not know what he would call the proposed sale of Scottish Wateris it an asset sale or is it a privatisation? If it looks like a privatisation and it sounds like a privatisation, it almost certainly will be a privatisation.
	Before turning to the Budget judgment itself, it is worth reminding hon. Members about parts of the fiscal process since last year's Budget that the Chancellor did not mention today. In the middle of the existing financial year, the Chancellor rushed to the Treasury Committee to change the economic cycle's starting date. He then fiddled the end date of the cycle, and he also started to correct some of his mistakes in the pre-Budget report.
	The Committee had already warned the Chancellor that because of earlier misjudgments, he was likely to have to put up taxes, increase borrowing or reduce spending. As hon. Members know, he did all three of those things in December: he put up taxes quite significantly, especially on North sea oil; he increased his borrowing forecast; and he cut spending by reducing the original envelope that he had sketched out for the comprehensive spending review 2007.
	Today's Budget was largely set by the pre-Budget report. Those who follow our proceedings may be puzzled by how the pre-Budget report has evolved into the Budget itselftoday seems to be a tidying-up exercise with an awful lot of flannel in between. Today's course had already been set, which is a shame, because the Chancellor could have done very much more.
	As other Conservative Members have said, the taxation system is far too complex, too burdensome and increasingly unfair. The Chancellor could have taken the opportunity today to introduce serious proposals on simplification, to make cuts rather than increasing taxes and to introduce measures to make taxation fairer. There is much more to be done on simplification than the minuscule target of reducing the administrative burden imposed by Revenue and Customs by 10 per cent. over five years. For example, although I admit that the figures show that the administrative cost of processing taxes is higher in Holland than it is here, the Dutch are cutting that burden by 20 per cent. over four years.
	Much could be done on matters such as simplifying statutory sick pay for companies and company car schemes, and there is a range of such measures that are simply an unnecessary burden on our businesses. Instead, the Chancellor has continued to make life more complicated for business and to increase the burden, although I was hoping that he would decrease it.
	I have heard nothing today about the plight of council tax payers, who are shouldering an increasing share of the cost of local services. When the Government entered office, council tax payers had to shoulder some 25 per cent. of the cost of local services, but the figure is now well over 35 per cent. Year after year, council tax payers must bail out the inefficiencies of central Government.
	On income tax, the effect of fiscal drag means that people of quite moderate means, many of whom are inside the public services that the Economic Secretary has defended so eloquently, have been dragged into the higher rate of tax. Some of those people are in the front line of public service, such as senior police inspectors and senior hospital nurses, who would never have dreamed of being described as the rich. They have been dragged into the higher rate of tax by the Chancellor's failure to index allowances. It is perfectly possible for a Chancellor to choose not to index allowances to suit any one year's particular fiscal judgment. However, the cumulative effect of refusing to do so is that more than 1 million people, many of whom are on relatively low incomes, are being dragged into the higher tax bracket.
	Business is paying more tax. Although, as the Chancellor reminded us, there have been welcome reductions in corporation tax, business is paying an increasing burden elsewhere. The key point about business taxes is that they are not stealth taxesthey are highly visible to business, and business is extremely mobile. I fear that white-collar jobs will follow blue-collar jobs out of this country overseas. The level and complexity of business taxation needs constant vigilance. We cannot stand still as other countries improve their competitiveness and the attractiveness of their tax regimes. I hope that the Chancellor will use his new all-star global advisory board to set himself a target of improving our competitive tax position. I have no magic bullet to offer him.
	It is a mistake for people to think that the 15not 10years of economic growth that we have enjoyed were triggered by any single reform. They are not underpinned by any single employment Act, change in industrial tribunals, or change in tax rates, but by a raft of economic liberalisation and supply-side reforms that took place much earlier, in the mid-'80s. Because our competitive disadvantage is now slipping away, the Chancellor and the Government urgently need to look again at the supply side to ensure that our climate for business is as competitive as it should be. Instead, the Chancellor merely said that he would continue discussions on the rate of business tax and continue to review the level of national insurance against the level of taxation, and we are to have yet another report on business regulation. After nine years of the effects of this Government, the time for discussions, reviews and reports is surely over. It is time to do something serious about the situation.

Edward Vaizey: Does my hon. Friend find it intensely depressing that the mood among Labour Members is not to take account of his remarks but instead to call for a windfall tax on some of our most successful businesses, and that profits are cited but the tax that those companies pay to the Exchequer is not? Does he agree that a windfall tax at this stage would drive many of our most successful companies overseas?

Michael Fallon: As my hon. Friend probably knows, I am easily depressed when listening to speeches by Labour Members, but even more so today by those who do not understand that the companies whose profits they want to windfall taxour major banks and oil companiesare world-class British companies bringing home to this country very substantial amounts of revenue as well as providing an important part of our financial and scientific base.
	I turn to borrowing. Only this Chancellor could consider 35 billion of borrowing to be a small amount. Only this Chancellor could consider missing his revenue targets five years in a row as somehow irrelevant. That is serious, because the trend is now clear. As my right hon. Friend the Leader of the Opposition so swiftly totted up this afternoon, the total amount of borrowing in prospect is some 175 billion. That is additional debt that must not only be repaid in due course but serviced by this generation.
	The Chancellor has again been over-optimistic in his Budget judgment in regard to the amount of revenue that he is likely to get in, and he will end up dependingas many Chancellors have doneon indeterminates such as an attack on excise duty fraud or the latest initiative on tax avoidance. Those measures are all very worth while, and exactly the sort of thing that the Treasury should be doing, but their yield is always unproven and uncertain. I wish I were as sanguine as the Chancellor about the growth rate for the economy as a whole. To me, the high street still looks a pretty miserable place.
	In urging the Chancellor to improve his forecasting record, I would like him to admit of a little humility, and perhaps allow a little more transparency in order to allow othersacademics and external expertsmore access to the Treasury forecasting model. I understand the difficulties involving confidentiality regarding individual and corporate taxpayers' details, but as the Chancellor and the Treasury have got their revenue forecasts so badly wrong year after year, I believe that we need an external eye to look at the matter. These processes need more external validation. I live in hope. I was roundly abused by the Chancellor in the Treasury Committee for daring to question the integrity and independence of the Office for National Statistics. Six months later, he announced that he was taking urgent measures to enhance the integrity and independence of the ONS. There is no reason why the Treasury's revenue forecasting model should not be opened up to a little more external scrutiny in the same way.
	Finally, I turn to spending. The Chancellor has postponed the spending review by a year, in order to turn it into a fully comprehensive spending review in which every stone is turned and every detail examined. So I was quite struck by the way in which he pre-empted it today. He identified a whole series of Departments that will have no increase at all, then announced that the Department for Education and Skills would receive the lion's share of the increase. We welcome those additional resources, but, as several of my hon. Friends have pointed out, it has been this Chancellor's biggest single failure that he has not secured the reform that needs to accompany them.
	Anyone who questions that judgment needs to come down to my constituency of Sevenoaks, where another 20 beds have been taken out of commission at Sevenoaks hospital because the primary care trust has run into deficit. They should come and talk to Kent police, whose so far successful investigation into the Tonbridge robbery has been distracted by the Government's ill-thought-out proposal to merge them with the Surrey and Sussex forces, which was finally postponed only yesterday. They should also come and meet the district and county councillors who want to deliver public services but who are now at loggerheads, wondering what the future bureaucratic structure to be inflicted on them will bring.
	None of this bureaucratic tinkering with NHS trusts, ambulance trusts, strategic health authorities, police authorities and district councils will directly benefit patients, victims of crime or council tax payers. On the contrary, all that we can be sure of is that this top-down, bureaucratic, Whitehall-driven reform will impose extra cost and distract those local services from doing the job of servicing their local community.

Edward Miliband: I know what a well-informed expert on these economic matters the hon. Gentleman is, sitting as he has done on the Treasury Committee for a number of years. On the subject of depressing speeches, however, I am surprised at some of the things that he has said. Will he not concede that the extra investment that the Government have put insuch as the increase in investment in schools that the Chancellor mentioned todayhas made a difference in his own constituency?

Michael Fallon: Yes, I certainly concede that, and I welcome the extra spending on educationas a former Education Minister, I could do no less.
	As I was saying, I get depressed listening to some Labour Members' speeches, and to quite a lot of the Chancellor's speech. Of course we welcome elements of public spending, and I particularly welcome the reform to channel more and more education spending outside local councils direct to schools. As someone who initiated local management of schools for all primary schools in this country, I welcome the increase in the direct grant to the head teachers concerned. The overall judgment needs to be questioned, however, and that it the Opposition's job.
	Before I gave way, I was discussing the failure to secure real reform to match some of the welcome increases in public expenditure. We heard no more today about the necessary reform to public sector pensions. We hear that discussions continue behind the scenes with the different trade unions, driven through different Departments of State. But we heard no announcement today about how the balance will be redressed between current and future members of public sector pension schemes, and between those who benefit from public sector pension schemes, as we do in the House, and those who have to rely on private provision.
	We heard little from the Chancellor about the general drive for efficiency savings. There was the odd mention of Gershon, but no substantiation of the savings that we can now expect, and no justification of some of the original targets. The Treasury Committee will look for much harder evidence that those efficiency savings can be captured, quantified and delivered in the shape of more efficient public services. We heard little today about more local empowerment. We did not hear about reforming working practices, more local pay, really sorting out the delivery of those services at the sharp end or helping to enfranchise police area commanders, hospital managers and head teachers.
	This is the Chancellor's 10th Budget. My real regret is that he appears to have learned nothing from the failures of the previous nine Budgets. Whether or not this Budget will help propel him further into Downing street, I do not know. I do know, however, that the country will continue to be the worse off for the mistakes that he has made and the arrogance with which he refuses to recognise them.

Alan Simpson: Budget debates are often conducted within a strange sense of time. The short term is about whether the Budget will survive the press headlines and analysis tomorrow. The medium term is defined as how the Budget will look in a month or a year's time. The long term is the end of this Parliament. Anything beyond that is infinity. The difficulty for our constituents is that they have a different sense of time, of the critical issues that face them today, and of issues that Government and Parliament must address in the years ahead, in their working lives and the lives of their children. Against some of those measures, I want to reflect on some of the matters that were not dealt with in today's Budget.
	Sadly, the shortest of short-term considerationsfending off the press and seeing off the Oppositionhas almost been dealt with by the Leader of the Opposition. I was astonished by his speech, which was lamentable. It was almost as though he had set out to send himself off. It was an apology for his existence rather than a bid for the intellectual leadership of the nation. In that sense, the challenge to the Chancellor's Budget from the Opposition petered out before it began.
	Other challenges are waiting, however, beyond the Opposition Benches and tomorrow's press headlines. Those challenges are what Parliament must do to build a society and economy that will survive sustainably in the decades ahead and that will meet the current challenges and crises facing society. I make no apologies for saying that that is the entire focus of what I hope will be my Budget contribution.
	The Tories made some interesting comments. They spoke of a Labour Budget disregarding wealth creation and being indifferent to productivity, and said that those were the cutting edges of the economy that they defended and we ignored. I refer Members to a book that will come out within the next week called Rich Britain, by Stewart Lansley. It is an analysis of the current state of wealth distribution in the United Kingdom. Among its key observations is that 25 years ago Britain was one of the most equal societies in the developed world, but now we are one of the most unequal. In the years since 1990, the number of people sitting on assets of more than 100 million has increased fivefold. Twenty years ago, the income gap between the chief executive of one of our FTSE 100 companies and the average worker in that company was a factor of 25. Today, the earnings gap has risen to 120. That is the wealth divide that has opened up in our society.

Greg Clark: The Prime Minister famously said that he had no interest in the earnings of David Beckham. Does the hon. Gentleman share the Prime Minister's view?

Alan Simpson: No, I do not, and I think that it is a mistake to presume that earnings in the richest part of society are not a zero sum game. That is one of the great myths that is debunked in the book that I mentioned. It has always been argued that if the superrich are allowed to be superrich, they will somehow engender a dynamic in the economy that will drag everyone else's earnings along with theirs.

David Taylor: Trickle-down.

Alan Simpson: Yes, it is the trickle-down approach to economics, but the figures do not justify the claim.
	Two studies paint a picture of the actual state of affairs. The Institute for Fiscal Studies recently produced a report showing that Britain has one of the lowest rates of innovation compared with our main competitors in the industrial world. We also rank 15th among the 30 richest countries in terms of productivity growth. There is little evidence to suggest that the freeing up of wealth acquisition among the wealthiest is delivering the productivity gains that Members would like to see, or to claim.

Graham Stuart: Does the hon. Gentleman accept that the countries that are being innovative and have the most dynamic economies have not adopted the Soviet-type policy that almost underlies his comments, but apply lower taxes? Ireland, for instance, wants to reduce corporation tax. Companies setting up there are now contributing in a major way to Irish tax coffers, and hence to schools and hospitals.

Alan Simpson: Other Members would say that what underpins the dynamism of the southern Ireland economy is the number of subsidies that it has received from the European Union. That is what allows such investment and relocation to take place. In many ways, those subsidies are merely relocation bribesthey are not necessarily about productivity gains. The notion that if taxes on the rich are reduced wealth will flow to society as a whole is pure mythology.
	The other study that I wanted to mention was conducted by Manchester university and relates to our thinking about economics and productivity in this country. It reveals that the top company heads in the United Kingdom have enjoyed pay increases that bear no relation to any benchmark or cross-section of productivity measures against which they could be justified. The study refers to a culture of value skimming among senior management in UK industries. It says that
	top managers in giant firms appear to be an averagely ineffectual officer class who do, however, know how to look after themselves.
	They do not create wealth; they simply become incredibly skilful at pocketing it.
	Nowhere is such a culture more apparent than in the management of the water industry, a critical issue to which I now turn. Today is world water day, which is an interesting benchmark for the House. No mention was made of it in the Budget. It comes at a time when 12 million households in the UK, mainly in southern England, have been told that they are likely to face hosepipe bans and water restrictions during the summer, and when the UK water industriesthe companies responsible for water managementare haemorrhaging 4.7 billion litres into the drains through unrepaired leaks every single day of the year. That is enough water to meet the needs of 14.5 million households. The scale of inefficiency in the management of the water supply is breathtaking and it will certainly be neither welcomed nor understood by any of those who face hosepipe bans and water restrictions.
	Despite that crisis, the rate of leakage reduction has fallen in the past five years. However, the rate of self-reward, profits and distributed dividends has risen. Dividend rates in the UK water industry are now four times higher than those of our European counterparts. Last year, executive pay in the water industry increased by 31 per cent.at a time when leakages were becoming colossal. Now, the industry is asking the country as a whole for some form of restraint in order to manage its way out of the crisis, but such restraint has nothing to do with the rewards that those in the industry pay themselves. We have created a water service delivery culture in which companies are pouring water down the drain, and in which that rate of loss is matched only by the rate at which they pour money into their own pockets.

Richard Younger-Ross: I have a great deal of sympathy with the point that the hon. Gentleman is making. Does he accept that there is an inequality in this regard? In some areas, the price paid by people for so-called improvements to the water supplyimprovements that they are not seeinghas risen exponentially. In areas such as the south-west, the water rates and the council tax combined account for more than 25 per cent. of some pensioners' income. That is unsustainable for the poorest in our societythose on fixed incomes and pensionsparticularly given that, as the hon. Gentleman says, there are those who are making large profits out of the water industry.

Alan Simpson: The hon. Gentleman makes an important point, and Members in all parts of the House who have long campaigned for recognition of the concept of fuel poverty are beginning to understand that water poverty could be no less a threat to the poorest and most vulnerable in our society.
	It is obscene to have such a crisis of affordability and access at a time when the levels of self-reward in these privatised industries have gone through the roof. This is indeed almost a national obscenity, so it is indefensible for us, as a Government, not to intervene. We should say, for instance, that water companies can pay no bonuses until they have met the European average for water losses, which is 5 per cent. At present, we are losing almost 25 per cent. of our water supply. Why should we create a market that allows executives to reward themselves, but which cannot deliver a consistent water supply to the public?

David Taylor: My hon. Friend and regional near neighbour paints an accurate picture of water companies' incompetence in tackling water leaks, and of their directors' greed in filling their pockets. Does he agree that such behaviour sometimes tips over into the fraud and dishonesty exhibited by Severn Trent plc, the privatised utility that serves both of our constituencies, which provided fraudulent figures to justify very significant increases in water supply charges? Is not that an appalling thing to do to people in poorer circumstances?

Alan Simpson: I think that it is. As an observation, I want to say that the impetus to attempt to cheat the public and the regulator by providing false information is a direct consequence of the fact that responsibility for ensuring that services are of high quality and that accounting is honest has been pushed away from Government. We now express surprise that pushing that responsibility away to arm's length should have engendered a culture of cheating and dishonesty, but we are reaping the harvest of the mistaken belief that throwing assets out to the private sector would lead to that sector delivering social gain. What has happened, in fact, is that it has delivered social greed.
	At the same time, hon. Members are lobbied, in the House and in our constituencies, by people who have been punished not for pursuing policies of greed, but for acting in a responsible manner. I am referring to the 85,000 people who have had their pensions stolen. I spoke earlier about the lack of wisdom of using pensions savings for speculative purposes, but the people who have suffered are the ones who did as successive Governments, of all parties, asked them to do. They put money into pension schemes so that their retirement years would be properly provided for, and we have a moral duty to ensure that that money is paid back. We need people to believe in saving for their pensions, but that has to be underpinned by a cast-iron guarantee that those savings cannot be stolen.
	If people choose to cash in their pension savings and subsequently squander the money on speculation, that is their tough luck. However, I believe that it is a criminal offence to cause people to lose out after a lifetime of regular saving into a pension scheme. An offence like that must be redressed in full. How such redress is achieved is, in part, a responsibility for the Chancellor and the Government.
	The cost of full repayment is put at 15 billion over 60 years, but the House will soon be asked to make a decision about renewing the Trident nuclear weapons system at a similar cost. I would much prefer the money to be used to redress the difficulties faced by people whose pensions have been nuked rather than to pay for a weapons system that is likely to be used to nuke the lives and prospects of other people.
	That choice is the language of priorities. Aneurin Bevan always said that being in government required us to make key decisions of that sort. Restoring the stolen pensions is part of creating the platform of credibility on which we will restore people's belief in the sanctity and security of pensions and pension contributions.
	My hon. Friend the Member for Hayes and Harlington (John McDonnell) spoke about the need to restore the value of the state pension and its link with earnings. That is another aspect of the matter, and would cost about 7.3 billion. On the figures that I mentioned in relation to the gap in terms of self-rewards among the corporate rich, if we were to have a windfall tax on executive bonuses and profits, that would bring in 3.75 billion a year. If we were to impose a similar tax on executive share options, that would cover the rest of the gap in relation to what is required to restore pensions and their link with earnings.

Graham Stuart: In a globalised world, which the hon. Gentleman may regret, the high earning individuals to whom he refers will simply go to another financial centre and set up in another country and none of the money will go into our coffers. Surely even he can see that that might be counter-productive.

Alan Simpson: No, I do not think that that is so at all. Let us consider what this country produces. I go back to a point made from the Conservative Benches. If we want to begin with the question of the creation of wealth, it is fair to say that there are a few dynamic entrepreneurs in the UK who have not only invented things to make, but have gone on to produce them. We ought to consider how to reconnect with support for domestic manufacturing. Many of the countries that are far more successful than we are at that are in that position because they have much more interventionist policies in their markets. There is a presumption that it is not enough to talk about inventions if one does not create the domestic circumstances in which those inventions have markets.
	That is the point that I want to come to on the climate change challenge. One of the big criticisms that we hear from the parts of the manufacturing industry in the UK that are involved in the development of new technologies and sustainable energy systems is that we should look at what is happening in other parts of Europe. The Governments of those countries have created a market in sustainable energy systems and renewable technologies because they have changed the rules and financial subsidies in relation to those markets. Germany is streets ahead of the UK in doing that. It has captured 15 per cent. of the world market in renewable technologies because its firms have a domestic market in which to sell. In Berlin, 80 per cent. of all new buildings that are going up are generating their own energy. Is that just a foible of Berliners? The answer is no. The market rules about buy-back pricing of electricity were changed so that people get back four times the price for energy they generate in relation to the cost of energy that they take from the system. Of course, that transforms the way in which energy suppliers begin to look at the energy market.
	I just happen to have completed my own eco-house, which will generate more energy than it consumes and which puts the surplus back into the national grid, but it is a crap deal. For every 1 of energy that I put into the system, it will cost me 7 to get it back. That is the nature of a rigged market. We can change the nature of that market so that there is less sense of theft and a dash for cash in the present and so that we have a market that genuinely invests to deliver in a sustainable way for the future. The rules are not God-given; they are Government-created. One can create competitive markets, but on a different presumption.
	In that sense, when we talk about the need for liberalised markets, I would just point out that, in the UK, in a liberalised market mentality, we are currently paying more for our energy supplies than our European competitors. The best point of comparison is Denmark. In 1970, after the last oil crisis, it looked at the short-term pressures, realised that it needed to come up with long-term solutions and began to invest systematically in decentralised energy systems. It did so knowing what most people in today's UK energy sector know: we have a monumentally inefficient national grid energy supply system. Some 70 per cent. of the energy input is lost in energy production or transmission. In Denmark and the Netherlands, decentralised energy systems, using co-generation techniques of combined heat and power, are 90 to 95 per cent. efficient. Those countries recognised that they could meet their energy needs, and their energy security needs, through decentralised energy systems using the energy that we throw away.
	Why do we not take the opportunity to change the fiscal rules relating to energy markets to allow a paradigm shift, not into the absurdity of a new generation of nuclear power stations or the presumption that we are under some obligation to prop up a grossly inefficient national grid, but in the way we think about energy generation and supply? The Dutch are building roads that incorporate solar power generation so that the energy needs of 400 houses can be met by every new kilometre of motorway. Why are they doing it, but we are not? It is because their Government intervene to structure the market towards renewables rather than short-term consumption or profit generation.

Edward Vaizey: I have listened to the hon. Gentleman's speech with intense interest and, if I had the opportunity, I would reply to it in detail, not least because Thames Water is planning to build a reservoir in my constituency and because I have had the Thames Valley energy centre round to my home to reduce my emissions. I hope that the hon. Gentleman will put on his website the details of how he created an eco-home. I completely agree with him about fiscal rules. Will he congratulate Braintree council, a Conservative council that has reduced council tax for energy-efficient homes? Does he also agree that the Government could ensure that all new homes meet the highest environmental standards possible? It is in their hands to do that today.

Alan Simpson: The Government could do that and I would encourage them to do so. They could require new homes to meet not only the decent homes standards, but the standards that are being set for other parts of Europe, which are considerably higher than the decent homes standards. Those new standards make our requirements seem like the last generation.
	The reality in the UK is that 80 per cent. of the population is likely to live their lives in 80 per cent. of the existing stock. The question is what we do about those who are living in existing housing stock. That position is profoundly affected by other changes. Since 2003, gas prices under British Gas have risen by 80 per cent., and its electricity prices have risen by 38 per cent. The incomes of the fuel poor have risen by nothing like that amount. I am proud of the fact that my Labour Government made the first legally binding undertaking to eradicate fuel poverty in this country. I am proud of the initiatives that have been adopted under the warm homes programme, but the recent burgeoning of oil and gas prices is taking people back into fuel poverty far faster than the programme is lifting them out of it.
	By 2003, we had reduced the numbers of households in extreme fuel poverty to some 1 million. We were on track to eliminate fuel poverty in the most vulnerable households by 2010. As matters stand, the figure has risen to 2.7 million and is projected to exceed 3 million by the end of the year. The only way to reverse that is through a step change in intervention in the market, both to reward those who are able to adopt energy conservation measures in their own homes and to require standards to be met by those who wish to lease out properties and those who are building properties that are energy guzzlers, rather than energy generators.

David Howarth: Does the hon. Gentleman accept that the Government could have effected energy efficiency in existing houses at the 80 per cent. to which he referred if they had decided to apply the new part L of the building regulations to house extensions? However, the Red Book confirms that they are not prepared to do that.

Alan Simpson: That is certainly one measure that could have been used, but not the only one. As has been suggested, we could tie such a provision to exemptions or reductions in council tax, to stamp duty or to licensing for rented houses of multiple occupancy, all of which could be conditional on energy efficiency. However, there is a cost involved. We need to be honest about that and take the cost on the chin now, because the cost of not using energy efficiently will be paid in people's lives. That is the real challenge against which this Budget and future Budgets will increasingly be judged. To what extent will we offer more than lip service to making profound, demanding, changes in energy costs or climate change that affect people's lives or their ability to stay alive? All future Budgets will have to be judged against those criteria.
	I have a final observation about the experience of building my house. It feels morally uplifting to have done that

Edward Vaizey: Put it on your website.

Alan Simpson: The architect and I will have lots of fun doing just that.
	One of the things that experience taught me is that there are no individual solutions. My contribution to energy generation would be infinitely more efficient if it could be fed into a decentralised energy system for Nottingham, in which co-generationthe interaction between the energy needs and energy generation of houses, shops and businesseswas part of an integrated whole. We shall achieve that only when fiscal measures make such a shift possible. That is an admission of the limits of the contribution I can claim in lightening the ecological footprint of my existence on the planet. My contribution would be much more significant if my footprint was lightened alongside others and in conjunction with them.
	In budgetary terms, we need to look at the management of markets and the management and deployment of fiscal incentives on energy. Recently, we handed out a public, taxpayer subsidy to clear up the 85 billion waste management costs of the last generation of nuclear power stations. Soon, we shall be asked to believe that there will be no similar costs in future for a subsequent generation. I have to say to the Chancellor, his colleagues and colleagues on both sides of the House that the public, taxpayer subsidy for that next round of follies would run off with the budget for all the other interventions that would bring about fundamental change towards a sustainable energy system for the UK in the 21st century.

Edward Vaizey: The use of that figure in relation to nuclear new-build is extremely disingenuous. That was a historic cost; there is no doubt that the generation and disposal of waste was shockingly bad 30 or 40 years ago, but that would not be the case now. Those who oppose nuclear new-build tend to compare what we could build now with what we built in the past, but in fact that would be the equivalent of buying a 1970s Ford Cortina, whereas nuclear new-build now is the equivalent of buying a Toyota Prius. Does the hon. Gentleman agree?

Alan Simpson: No, I do not agree; nor does the Sustainable Development Commission or Greenpeace. Those who consider the issue say that, as soon as we start to scrutinise the cost element of what the nuclear industry wants, we are back into the same old game. I remind the House that, when we were there first time, the House and the public were promised atoms for free. We have been paying for that deception ever since, and we would do so again. My caution is that, if we go down that path, all the money that the Chancellor would have to play with for a shift towards renewables and decentralised energy would be hijacked and put into the pockets of the nuclear industry once again. That will not meet our energy security or supply needs.
	My final point on energy and the carbon consequences of how we run the economy is to echo the sense of sadness that aviation duties were not mentioned in the Budget. Some colleagues say that those duties are covered by international agreements and that we are pushing forward with the plans for emissions trading, but I would add a word of caution. We need to look carefully at what emissions trading is about. With all other aspects of pollution trading, the real danger is that a market in non-goods is created. Some of the greatest enthusiasts for emissions trading schemes are in the City of London, and they see themselves as making large fortunes out of their brokerage roles in the trade in non-goods.
	In aviation, it is far simpler to consider non-tradable duties. It would be very simple to calculate the current carbon miles impact of flights from all UK airports in the past year. We could set that as a quota for them, and we could say that the UK regime will be to reduce every airport's quota by 5 per cent. a year. Airports could specify that priority will be given to higher efficiency aircraft or shorter flights, with higher passenger usage or shorter cargo trips, all of which reduce the carbon content of passenger miles and food miles. We must engage in that scale of shift in the next 10 years if we are remotely likely to manage our way through the climate change that will happen. We can do that if we intervene to set those climate change duties in fiscal terms that define a different shape of aviation market.
	All Budgets are really expressions of solidarity, to a greater or lesser extent. They are transfers in society. They represent the extent to which a society will take elements of the wealth generated today by those in work and redistribute it to those out of work. They are transfers from one generation to another in determining how people in work today meet the pension needs of those who are retired and the needs of our children in the future. They are transfers from one region to another and from one section of society to another.
	It would be possible for the House, in solidarity, to have a Budget that wrote off the NHS deficit and scrapped prescription charges, which would cost us 1.2 billion. We could do that if, for instance, we transferred the costs of our current military occupation of Iraq and Afghanistan, which currently comes to 1.3 billion a year. It would be possible for us to have a Budget that guaranteed that we delivered the decent homes standard, with a bill of 7 billion, by setting defence spending to the European average. We could change the fiscal rules of the energy markets to create sustainable markets and decentralised energy networks in the way that I have described. We could restore faith in pensions and pension saving by restoring the state pension and repaying stolen pensions with a tax on dividends and executive pay for gross inefficiencies in delivery.
	All that would be drawing back the nation's wealth, not from those who have created it, but from those who have been involved in a process of wealth annexation. That, for me, is what Governments of whatever hue will be asked to do if we are to meet the needs of social cohesion and environmental stability in this country in the years and decades ahead. I hope that we have a Labour Chancellor who will not lack the courage to face up to that challenge and deliver those answers, if not in this Budget, in the Budgets ahead, regardless of whether he does so as the Chancellor or whether he aspires to do so as leader of the parliamentary Labour party.

Several hon. Members: rose

Madam Deputy Speaker: Order. We now have little more than an hour for the debate. Hon. Members have patiently waited to deliver their speeches, so I hope that the remaining speeches will be brief so that they can all contribute to the debate.

Greg Clark: It is a privilege to follow the thoughtful speech made by the hon. Member for Nottingham, South (Alan Simpson). Perhaps I should pay tribute to the Chancellor for his 10th Budget statement because delivering 10 Budgets in a row is not to be sneezed at. His statement seemed very familiar in some ways. Perhaps it is like an ageing rock star taking his greatest hits on tour year after year, albeit with a slightly dwindling audience, at least on the Labour Benches. I pay tribute to the Chancellor for his achievement.
	When I started my career in business, I worked for the Boston Consulting Group. A few days after joining the company I was sent to south America to investigate the market for breathing apparatus among fire brigades in the Argentinean pampasit was a fairly exotic mission. Owing to long flights and delays, I had little time after getting back before I was required to present my report to our client. Just before we were about to do that, the senior partner called me into his office and looked at my report. He jabbed an accusing finger at a number in the document that he chose at random and said, Greg, how did you come by that figure? I was required to explain how I derived the calculation and, fortunately, I passed the test because I was able to explain exactly where it had come from. The senior partner was making an important point because if I had not been able to give an explanation, no other figure in my report would have been of any worth whatsoever. If I could not explain every figure, there was no point presenting the report to the client at all.
	When I came to the House, I assumed that there was a similar process when the Chancellor of the Exchequer presented figures in his annual Budget to Parliament. I assumed that there was an equivalent of the senior partner who went through the Budget figures. It might have been that the Chancellor himself asked his officials who are in the Box today how the figures were derived. If not, perhaps the Prime Minister had the papers laid out on the Cabinet table and, pointing to a figure, said, Gordon, how did you get to that number? Whatever the process, I assumed that if a report on breathing apparatus in Argentina could merit such scrutiny, anything presented to the House by the Chancellor of the Exchequer in the annual Budget should merit exactly the same treatment.
	I was thus interested when the Chancellor said earlier this afternoon that savings of 6 billion had been secured from the Gershon efficiency review. That is extremely important because any Government have two duties: first, to advance new policies that will reform and change the country in which we live; and, secondly, to  manage effectively the public services and administrative activities that are in the remit of the Government. Both duties are equally important, and the Gershon review goes to the heart of the second one. It is absolutely crucial that public services are run effectively and efficiently at the minimum cost to the public, not least because any savings that are made can be reinvested in services, can promote the greater quality of those services, or can be returned to the public through tax cuts. It is thus important that the numbers are right, and the work of the Public Accounts Committee, on which I serve, is very much geared to that end.
	However, when the Chancellor announced his 6 billion figure, it called to mind an earlier claim that he had made about Gershon savings. The Committee examined that. The right hon. Gentleman made the same claim in his Budget speech last year when he said:
	I can reportahead of targetthe first 2 billion value-for-money Gershon savings.[Official Report, 16 March 2005; Vol. 432, c. 260.]
	The trouble is that having looked into the basis of those savings, the National Audit Office found that they collapsed under scrutiny. The report published in February of this year said:
	we conclude that most of the efficiency
	savings
	announced in March 2005
	in other words, by the Chancellor in the Budget
	were not based on clear audit trails and, from our understanding of the process through which the gains were collated, were not subject to adequate challenge by the Office of Government Commerce.
	That concerned me, and I was interested to find out what the exact process was that resulted in the savings.
	The inquiries that I made shocked me. So disbelieving was I that they could be true that when the Public Accounts Committee examined the Office of Government Commerce and the NAO on its report, I put to John Oughton, who heads the OGC, what I understood the process to be.I said at the Committee's hearing:
	As I understand it, the process of collating this information involved the Treasury ringing round departments asking what savings they could offer up in time to be mentioned in the Budget with no checks at all.
	John Oughton said:
	That is an accurate statement of the gains as they were reported in the spring of 2005.
	I may have been naive in my illusions about the process, and perhaps I expected the equivalent of my senior partner to be there, jabbing his accusing finger at the numbers, but for the NAO to discover that only half the savings stood up to scrutiny, and for the head of the Office of Government Commerce to be forced to admit that, is shocking.
	That is not the only basis for concern about the numbers presented in the Chancellor's speech. Just as my presentation on breathing apparatus in the Argentinean pampas collapsed if one figure was found to be wrong, how can we have confidence in any of the many figures that he presented if the history of their scrutiny shows that they fall away beneath our gaze?
	The hearing also raised worrying questions about the substance of the Gershon review. I do not want to make political points about the review as an appropriate subject on which the Government should take a view. I genuinely think that it is extremely important, but the NAO advised us that commercial organisations might expect in an efficiency drive to identify about 10 per cent. of the relevant administrative costs as savings. The Gershon review proposed savings of only 2.5 per cent. I do not quibble with that; I merely compare it with practice in commercial organisations. However, it is important to achieve even that modest level.
	Again, when the NAO looked closely at the Gershon review, it discovered that most of the savings accounted for in the 21.5 billion ultimate total from Gershon came from projects that had started before the review was conceived. It is stretching credulity to regard them as being Gershon savings; that is what the NAO found. When I questioned the Comptroller and Auditor General in the PAC on his assessment of the quantity of new moneythe real savings that were being made under GershonI discovered something even more shocking.
	The NAO established a sum of 20 projects under the Gershon review that it looked at in detail. That sample was designedI asked Sir John Bourn about it directlyto be representative of the whole, as is any sample. Any auditor would choose a sample on that basis, and Sir John confirmed that. Of that sample, the NAO was able to say that, of the ongoing efficiency savings, only between one and three were in any sense new and engaged in subsequent to the commissioning of the Gershon review. On the basis of that sample, 85 per cent. of the funding improvements that the Chancellor presented last year and, indeed, this year as possible do not merit the flourish that he gave them. They were the normal, embedded efficiency savings that Departments were already engaging in. That again gave me great cause for concern.
	The final point that I wanted to raise in this Budget debate, since the Chancellor chose to talk about having achieved 6 billion-worth of Gershon efficiency savings, is their reliability and robustness. The Office of Government Commerce helpfully makes an assessment of the deliverability of each of the savings by Department, and ranks them in four categories. Red means that there are grave concerns about deliverability, and green that there are good prospects that the savings will be delivered.
	The NAO had access to that information and helpfully reproduced in a series of pie charts in its report how many projects fell into each of the four categories of deliverability. It was drawn to my attention that there seemed to be a misprint in the charts, because there were only three segments to the pie. It was only on looking at the small print to the key to the table that it became apparent that that was so because, as at December 2005, there were no projects in any Department that were rated green as having good prospects of being delivered. Therefore, far from the Chancellor's being able to bank on, boast about and flourish the 21.5 billion-worth of savings in his Budget statements, the truth is that there is extreme risk that they will be delivered. The evidence for that is reported by the Office of Government Commerce itself.
	In reviewing the question, the NAO said:
	We have significant concerns over whether the adopted measurement methodologies can be relied upon to substantiate efficiency gains effectively . . . Only a few departments recognise the potential risks from double-counting, cost-shifting and additional operational costs.
	Far from being numbers that can be relied on, that are cast iron and that have the imprimatur of the Chancellor, as I assumed if reported in a Budget, they are deeply suspect and so should be treated with the greatest of suspicion.
	What is to be done about this? I would have hoped that the Chancellor might exercise the senior partner role and interrogate the figures. He could have taken them to the Prime Minister, who could have asked some searching questionsalthough the Chancellor might have asked some searching questions of the Prime Minister, so perhaps that conversation was not going to happen. In the presence of such difficulties, who better to certify that the numbers are above board and accurate than the Comptroller and Auditor Generalthe head of the National Audit Office, Sir John Bourn?
	All Members would recognise that Sir John is an unimpeachable figure of great expertise and familiarity with Government figures. Indeed, he has published today an audit of assumptions on the forecasts in the Budget. The Red Book lists at great length the assurances that he has been able to give on factors such as the dating of the cycle, privatisation proceeds, thetrend rate of GDP growth, UK claimant unemployment, interest rates, equity prices, VAT receipts and so on. Sir John Bourn rightly signed off those variables as above board and put them into the public domain. What more reasonable request could there be than to ask that he look at and validate Gershon efficiency savings before they are deployed by the Chancellor? I urged the Chancellor to do so at the last Treasury questions, suggesting that there was plenty of time before the Budget to ask Sir John to look at the savings. I raised the matter at a hearing of the Public Accounts Committee, and Sir John told me that he was ready, willing and able to conduct such an audit before the Budget. He said, too, that it would be a good idea to provide that assurance to the House.
	The Chancellor cited 6 billion of Gershon savings today. I rang Sir John Bourn this morning to see whether the Chancellor had availed himself of his kind offer. I am afraid that Sir John is probably still waiting by the phone, as his invitation has not been taken up. Once again, the numbers that the Chancellor presented as definitive Gershon savings have not been signed off by the National Audit Office. On previous form, the House must regard them as provisional and treat them with grave suspicion.

Brooks Newmark: Listening to the Chancellor's Budget one would think that he was living in a parallel universe, not the real world. I became an MP last May, and the House will not be surprised that, as a business man turned politician, I will look at the Budget from the perspective of a business man. I draw Members' attention to my list of interests in the Register of Members' Interests.
	While it is tempting to undertake a SWOT analysis of the Budget, I would prefer to look at it in a different context. How well prepared is Britain or UK plc to meet the competitive challenges posed by fast-developing countries such as India and Chinaan issue acknowledged by the Chancellor? Turning first to the economy, I assume that the Chancellor's heading for the 2006 BudgetA strong and strengthening economyis ironic, because the evidence indicates otherwise. After he downgraded his growth forecast twice last year, UK growth was finally estimated to be 1.8 per cent., which is significantly below the growth rates of China, India and the United States. Moreover, we came a poor 19th among 25 EU member states.
	In the World Economic Forum league of competitiveness, we dropped from fourth to 13th. Not surprisingly, we face a record trade deficit of 47 million. Businesses are voting with their feet, as they face increasingly inflexible markets, greater regulation and higher taxes. Google and Applethe businesses of the futurehave both chosen to set up their operations in Ireland rather than the UK. Productivity growth is now only 0.4 per cent.the lowest in more than 15 years. Worse still, public productivity, as we have heard, is falling. Business investment, which fell to 9.1 per cent. of GDP in the last quarter of 2005, is now the lowest since 1965. Overall, the Chancellor is failing on all the long-term drivers of prosperity.

Rob Marris: I am listening with interest to the hon. Gentleman. Of course not all the economic indicators are as positive as we would wish, but I point out to him, first, that as I said in my speech, in gross national income per capita we have gone from seventh out of seven in the G7 to second out of seven. Secondly, on investment in Ireland and so on, I point out to the hon. Gentleman that last year the UK was the top in the world for foreign direct investment. That is encouraging as a reflection of foreigners' views about the UK as a place to do business, where, like the hon. Gentleman, I did business as a business person before I was elected.

Brooks Newmark: I appreciate the hon. Gentleman's comments, but the indications are that businesses are voting with their feet. When they have a choice, they are not choosing to come to the United Kingdom. They are choosing to go to Ireland, and we can learn the lessons from Ireland. Because it is now a low tax economy and has a flexible labour market, it is attracting the new businesses. We should take that in hand.
	If we are to prepare ourselves to face the competition posed by the Chinas and Indias of the world, we must, as everyone agrees, have a well educated work force able to meet the challenges of the 21st century. I congratulate the Chancellor on dealing with this aspect. The extra 1 per cent. that he has added to the education budgetI believe it is 440 millionis welcomed by the Opposition as well.

Kevan Jones: I am listening carefully to the hon. Gentleman's remarks about education and the importance that he attaches to it. I know that he is new to the House, but can he tell me why, on every occasion that the Government have voted extra investment for education, his party has opposed it?

Brooks Newmark: I will answer that briefly. It is because of the use of the word investment. Our complaint is directed largely at the expenditure on the bureaucracy that lies behind education, not at the infrastructure. The infrastructure is important, and I acknowledge that.
	Perhaps the biggest indictment of all is that the number of adults without basic literacy and numeracy is not shrinking, as the Government would have us believe, but is growing by more than 100,000 a year, with almost a third of 16-year-olds still leaving school without achieving 5 A to C passes. We should be supporting our centres of excellence, such as the chemistry department at Sussex university, not abandoning them. We should be encouraging our children to learn languages such as Chinese, for that is where our future lies.
	On savings and pensions, as far back as 1995 the Chancellor stated:
	We will never raise the levels of investment in our economy if we do not encourage savings,
	yet our savings culture has been eroded dramatically since Labour came to power. The savings ratio has almost halved since 1997. Worse still, the Chancellor has continued to undermine our pension system. As my right hon. Friend the Member for Witney (Mr. Cameron) mentioned, the right hon. Member for Birkenhead (Mr. Field) was kind enough to remind us that
	when Labour came to office we had one of the strongest pension provisions in Europe, and now probably we have some of the weakest.
	Why is that? Because the Chancellor has insisted on taxing pension funds to the tune of 5 billion each and every year. That is almost 50 billion since Labour came to power.
	Back in 1993 the Chancellor said:
	I want the . . . end of the means test for our elderly people,
	yet nearly half of all pensioners are subject to means-testing.
	In any assessment of our relative economic strength we should look at the state of our public finances. The Chancellor continually spends more than planned, with the result that he has had to fiddle his own fiscal rules not once, but twice since the last Budget just to avoid breaking his own golden rule. Despite moving the goalposts twice, the Chancellor still went into deficit in the fourth quarter of 2005.
	Part of the problem lies in the Chancellor's inability simply to budget, which means controlling expenditure, and accurately to predict money coming in and money going out. As Mr. Micawber said:
	Annual income twenty pounds, annual expenditure nineteen nineteen six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result misery.
	An example of that shortcoming is the Chancellor's varying predictions of the public sector net borrowing requirement. In 2001, he predicted the need to borrow 12 billion in the fiscal year 2005. In 2002, the figure was revised upwards to 19 billion. In 2003, it was revised upwards to 30 billion. In 2004, it was revised upwards to 33 billion. Finally, in 2005, it was revised upwards to 35 billion. Frankly, Mystic Meg would do a better job of forecasting than the Chancellor.

Mark Todd: The hon. Gentleman has not been in this House as long as me and therefore did not sit through the first Parliament of this Labour Government, in which the Chancellor consistently underestimated the state of the public finances. [Interruption.] That was another fault, but perhaps he would commend it. I ask him to reflect on   public debt as a percentage of GDP, because I should have thought that he would commend the Government's record as being competitive compared with that of most other major nations.

Brooks Newmark: I congratulate the hon. Gentleman on his foresight, because I am about to address that topic. Perhaps most pernicious of all is the state of Government debt. The Chancellor has continued to hide extra Government debt off balance sheet in order to avoid breaking his own sustainable investment rule. The headline figure used for public sector net debt is 436 billion, which is 35 per cent. of GDP. That headline figure is attractive, but the reality is that each and every year the Chancellor is hiding more and more debt off balance sheetup to 850 billion at the last count. The real public sector net debt figure could be as high as 1.3 trillion, of which roughly 450 billion is on balance sheet and 850 billion is off balance sheet. That is a staggering 105 per cent. of GDP. For every 1 that the Chancellor is willing to show on balance sheet, he is now hiding 2 off balance sheet.
	Back in 1998, the Chancellor promised that he would
	enhance economic stability by ensuring that fiscal and debt management policy operate in accordance with the principles of transparency, stability, responsibility, efficiency and fairness.
	Although I would not go as far as to call the Chancellor's off-balance-sheet manoeuvrings Enron-style accounting, because they are technically legitimate, that form of accounting is patently not transparent, carries many risks and falls short of the standards required in the private sector. Only four weeks ago, London and Continental Railway's debt of 5 billion had to be reclassified as on balance sheet. Is this just the tip of the iceberg? I suggest that the Chancellor should heed the words of Dr. Johnson:
	whatever you have, spend less.

Rob Marris: I thank the hon. Gentleman for his usual generosity in giving way. He has discussed being in business, and I have discussed being in business: if my business were to sign a 21-year lease at 20,000 a year, we would not show it in our accounts as a contingent liability of 420,000, but that is what he is doing when he adds up all the liabilities that fall due over a long period of timein particular, pensionsand produces a present-day figure of 1.3 trillion, which is not how it would be done in business. I agree with him about transparency, but I suggest that he is over-egging his case by putting 50 years of liability into one year, which is not helpful.

Brooks Newmark: I beg to differ from the hon. Gentleman, because the calculation depends on the rate used to discount public sector liabilities, particularly pensions. If one uses the long gilt rateit does not matter whether one uses 1.2 or 1.8 per cent.one ends up with a very big figure. I have used a discount rate to produce a credible figure, which is not cumulative.
	In the 2006 Budget, the Chancellor has once again demonstrated that his forecasts cannot be trusted, his taxes are neither fair nor clear, his regulations are stifling business, his means-testing is placing a greater burden on the neediest in our society, his raid on pensions has undermined a savings and pensions culture that was the envy of Europe, and his accounting methods are disingenuous and opaque at best. This Budget bears all the hallmarks of new Labour. It lacks transparency, does not address the challenges that we face in the 21st century, and does not prepare Britain for the future.

Mark Todd: At some points in the debate I thought that the Tardis was about to land in the Chamber, given so many reflections on economic policies that I last heard expressed 15 or 20 years ago. One or two Conservative Members evoked fond memories of the Thatcher years, which I do not remember so enthusiastically. The hon. Member for Tunbridge Wells (Greg Clark) even referred to the disciplines of management consultancy. As a business consumer of management consultancy, I did not find his remarks particularly relevant. Indeed, having consumed offerings from the Boston Consulting Group, I wish that they had passed through the stern audit that he mentioned. Never mindhe has given me an opportunity to reflect on my past.
	I look at this Budget primarily from the point of view of my own constituency, which has a much higher than average manufacturing base focused on companies such as Toyota and Rolls-Royce. One of my main concerns is therefore what this Budget does to help businesses of that kind. I welcome the inclusion of Sir John Rose in the Chancellor's taskforce to advise him on the future needs of business, which gives an input into his thinking from the most senior level at Rolls-Royce. I know that he has regular contact with that company in any case, and that he has been associated with the valuable initiatives in promoting enterprise in schools, including in my constituency, to which he referred in his speech. That is an extremely valuable contact.
	One of the concerns that manufacturing companies raise with me is the state of the energy marketplace and the implications of higher energy costs, particularly for heavy energy users. I noted what the Chancellor said about action at EU level. I welcome that, but I have to say that we require urgent steps towards free markets. I listened with great enthusiasm to what my hon. Friend the Member for Nottingham, South (Alan Simpson) said about the micro level of the energy sector. It is vital that major businesses in constituencies such as mine can purchase energy at the most competitive rate. The long-term failure to invest in storage infrastructure in this country, together with anti-competitive practices elsewhere in Europe, has not assisted companies in doing that. I look forward to the Chancellor's achievements through his initiatives.
	I welcome the examination of the fiscal and regulatory regime that businesses face. That has to be an ongoing process. I have noted the exchanges over the Legislative and Regulatory Reform Bill. I have a personal view, as a former business man. I welcome a process whereby needless regulations or regulations that are clearly time-limited can be changed rapidly to fit the requirements of the business community, but I also accept that there may be threats to the sovereignty of this place in allowing that to happen in an entirely unregulated way. I would wish the former argument to have the balance in any outcome that we produce through the two Houses in considering the Bill.

Graham Stuart: Would the hon. Gentleman care to reflect on the fact that, according to Government figures, the number of people employed in manufacturing increased by 200,000 during the last four years of the previous Conservative Government, whereas 1 million manufacturing jobs have been lost since 1997? Will the hon. Gentleman reflect on how that came about?

Mark Todd: I could indeed do that, although that situation is not reflected in my own constituency's experience. Manufacturing employment has continued to rise in South Derbyshire throughout the period of this Labour Government, which I very much welcome. I tend to dwell more on the strengths that have caused that to happen, which relate partly to inward investment and partly to a focus on investment in high added value manufacturing rather than in manufacturing at the lower end of the value chain. Our experience is that, when we do things extremely well and add a great deal of value to our skills, we tend to succeed, even in manufacturing. However, when we do neither of those things, we tend to struggle. The support for research and development is a key subject for some of the businesses in my area, and I welcome the broadening of the scheme that the Chancellor had already put in place to support R and D.
	I naturally welcomeas I would imagine every MP doesthe support for schools. My constituency has benefited hugely from capital investment. Opposition Members constantly say, Of course we welcome certain things. The response that I consistently make is, Yes, but not at the time they were done. I well remember the debates in 1997 on the windfall tax, the proceeds of which led to the massive investment that has taken place in our school infrastructure over the past nine years. Virtually every school in my area has received substantial capital investment. I particularly welcome the additional sum of money that the Chancellor has correctly made available to heads and governors, so that they can decide on its use. That will increase the flexibility of local schools to respond to their individual circumstances.

Stewart Jackson: I am interested to hear the hon. Gentleman's observations on education in South Derbyshire. Does he see a link between the record expenditure on education and the fact that between a quarter and a third of children leave primary school at 11 functionally illiterate?

Mark Todd: The first point to make is that that figure, though regrettable, is a great deal smaller than it was in 1997. Secondly, only by consistently continuing to invest in education will we make that figure as small as possible. We are all realists, and we know that there will always be a proportion of young people who will not be able to achieve the qualifications that we would like them to. The figure to which the hon. Gentleman refers is still too high, but it is about half the size that it was when this Government came to power.
	I also welcome the additional support for the further education sector, which I do not think has been mentioned yet

Rob Marris: I mentioned it.

Mark Todd: I must have missed that. I was watching the clock during my hon. Friend's lengthy contribution, but I missed that particular element of his speech. Support for the FE sector, which is often relevant to the development of business skills, is particularly important in an area such as mine.
	I want to conclude by briefly reflecting on an issue that is relevant to the speech made by the hon. Member for Braintree (Mr. Newmark), namely the position of the UK economy in the world economy. We have no grounds for being complacentI do not think that the Chancellor was, and I am certainly notbut we are now better placed than most other western European countries in that regard. That is partly for reasons of history, which I shall touch on briefly, and partly because of what the Government have achieved over the past nine years. The Opposition have naturally drawn out the fact that we have started to see a blip in productivity performance during the past 12 to 18 months, but, before that, an established performance of productivity improvement allowed us to move up the league table, certainly in western Europe, and to keep pace with the USA. I listened with interest to the speech of my hon. Friend the Member for Nottingham, South, who remarked on productivity performance. The best-performing country in productivity terms is the USA. I am not sure that he was necessarily commending that model to us, but I did not want to intervene on him to ask him to clarify that.
	Secondly, we have had the longest period of consistent growth in my lifetimeI do not know about the time of Vansittart and the Napoleonic warsand, I would imagine, in the lifetime of most other people in this country. Again, that has placed us in a much stronger position in relation to other economies than, say, France, as a comparator.

Stewart Jackson: Does the hon. Gentleman agree that the major engine of economic growth was the decision in 1992 to leave the exchange rate mechanism, a scheme supported by the great and the good, including the Labour party and the present Chancellor of the Exchequer? Does he agree that that is why the economy has grown over the past nine years?

Mark Todd: It is certainly entertaining to have 1992 raised when the current Leader of the Opposition was the ghostly figure behind Norman Lamont at that fateful time. I would not have thought that that topic would benefit from further exploration, so I will not venture into it. I will, however, make a European point towards the end of my remarks.
	Our level of debt is low by international standards. I take the points about off-balance-sheet figures, which, to be honest, could apply to any nation in the world. If we attempt to use internationally based comparisons, our position is good. Few would dispute that.We have some other advantages, however, to which we need to play firmly over the next few years.
	First, we have a reputation of being a liberal country with liberal markets and an emphasis on freedom of movement, freedom of expression and freedom of ability to establish businesses and prosper. My concern is that that is in a world in which protectionism is once again starting to rear its head. I have always been hostile to protectionism, whether in the European Union contextas there are concerning signs of the EU considering and being more sympathetic to protectionist measures than it shouldor in the major threats in the World Trade Organisation process of countries stepping back towards protectionism all around the world. We should play to that fundamental advantage with all our strength, as it builds the skills and flexibility on which, as a relatively small nation, we can play well.
	Secondly, the English language is a huge unsaid advantage in the global economy. I earned my living in the media industry, in which we play way above our strength as a result of that advantage. We have another considerable strength in the diaspora of our former empire, and many people trade freely with us partly because of the number of those on our shores who come from where they live. We have a large, prosperous and entrepreneurial Indian community. We have a Chinese community, which, again, has strong links.
	If we can play to those strengths over the next few years, I think that we will compete more effectively than any other nation in western Europe, and I am sure that we can do so.

Andrew Selous: It is important to consider Britain's relative economic position, in terms of competitiveness, vis--vis the major countries with which we do business. Under this Government, according to the World Economic Forum, we have fallen from 4th to 13th in terms of competitiveness. Productivity in the private, wealth-producing sector of the economy, running at 2.6 per cent. under the last Conservative Government between 1992 and 1997, decreased under the first term of a Labour Government to 2.1 per cent., and today is only at 0.4 per cent.
	Savings have also decreased rapidly. Between 1992 and 1997 the savings ratio was 9.7 per cent.; today it stands at just over half that5.5 per cent. The World Economic Forum rates the United Kingdom 98th out of 117 countries, and says that our low savings ratio puts Britain at a significant competitive disadvantage. That is obvious: it is the savings of the nation that go towards providing a decent savings system for our pensions and the business investment that we need to create wealth for the future. Business investment is also at an all-time low. At 9.7 per cent., it is at its lowest level since records began in 1965.
	Last year British growth was below the G7 average, below the OECD average and, indeed, below the global average. This year, it is actually below trend growth. Then there is taxation, which is important when businesses decide where to locate in the world. As we have heard from Members today, many businesses do have a choice. When the Government came to power, this country had the 10th lowest business taxes in the developed world; we now have the 10th highest. A few days ago, the ITEM Club and the accountants Ernst and Young concluded that, excluding North sea oil revenues, the UK tax burden was higher than it had ever been. I understand that, on the basis of the figures produced by the Chancellor today, by 201011 it will be touching some 41 per cent. of gross domestic product.
	Why is that important? There is evidence that other countries around the world that have taken a different tack in regard to tax rates have experienced significantly higher levels of economic growth. In Australia, John Howard's Government came into power in 1996, just a year before our present Administration. They promptly set about cutting taxes, and as a result the Australian economy has expanded by a third so far, compared with a quarter in the United Kingdom.
	What the Government often miss is the fact that a cut in tax rates will lead to an increase in the total tax take as business activity increases and companies from around the world decide to locate here. Ireland has done the same: it cut taxes on business and now has a higher income per head than the United Kingdom. At the other end of the spectrum, Swedenwhich has the highest taxes in Europe and possibly in the worldnow has a pre-tax income that would make it the fifth poorest state in the United States, just behind Alabama.
	There are important lessons to be learned from our relative global competitive position. If we want a thriving economy, we must secure a decent tax take with which to fund the public services that we all want.

Christopher Huhne: Perhaps the hon. Gentleman will tell us whether the figures that he is using have been adjusted for purchasing power parity.

Andrew Selous: In terms of pre-tax incomes, as far as I am aware the Swedish example has been adjusted. I think that there is a significant lesson for us to learn, whether we look at Australia, at Ireland or at Sweden. Overall, the evidence on relative economic advantage is pretty conclusive.

Rob Marris: Will the hon. Gentleman give way?

Andrew Selous: I will after I have made a little more progress. One or two other Members want to speak.
	The borrowing that the Chancellor announced today has been described, quite properly, as deferred taxation. That is exactly what it is, because our constituents will have to pay it back in the years to come. The figures are 37 billion for this year and 175 billion over the next six years. Those are very large sums, equating to 7,000 for every family in the countrya figure that people can relate to slightly more easily. In addition, of course, there is the off-balance-sheet debt, be it from unfunded public sector pensions liabilities, Network Rail or, indeed, private finance initiative and public-private partnership schemes, all of which will bear very heavily on the public purse. I am not arguing that we should not, therefore, have gone ahead with certain PFI and PPP schemes, but we need to be honest and to take into account the impact of the payback costs on the public finances going forward.
	This month, the CBI has estimated that the cost of UK regulation on business under this Government is approaching 50 billion. My hon. Friend the Member for Braintree (Mr. Newmark) told us that Google and Amazon have recently decided to locate in Ireland, rather than the UK; so has Oracle. At 47 billion, our trade deficit is the largest it has ever been. Our trade deficit with China increased by 20 per cent. during this year alone. I find it completely ridiculous, moreover, that Belgium is exporting more to India than we are, bearing in mind our historical and cultural links with that great country.
	The Chancellor talked a lot today about education and he was absolutely right to do so. Business people tell us that one of the issues that they are most concerned about when deciding whether to locate here or elsewhere is this country's skills levels. As far as I am aware, Amazon decided to locate in Ireland in part because its work force has greater language skills than does the UK's. That should be a significant lesson to us. We need to increase language ability in our schools, because we do not do nearly well enough in that regard.
	The Opposition welcome the money for our schools announced in today's Budget, but here I return to the issue of literacy and numeracy, which is tremendously important. According to the CBI, employers believe that one in seven adults in the UK is functionally illiterate. As my hon. Friend the Member for Braintree pointed out, according to the National Audit Office the total number of adults in that category is increasing by 100,000 per year. The Department for Education and Skills told us in January that one in three 16-year-old school leavers do not even have five A to C GCSE passes. As a result of all that, we are ranked 33rd in the world in terms of the quality of our state education system. That simply is not good enough for the fifth strongest economy in the world.
	What can we do about that? I am delighted that the Government have at long last agreed that synthetic phonics should be the basis for teaching children to read in our schools. Those of us who are familiar with the work of Melanie Phillips know that she argued for synthetic phonics many years ago in her book All Must Have Prizes. I regret that this issue became a matter for party political debate. I salute the efforts of my own party, particularly my hon. Friend the Member for Bognor Regis and Littlehampton (Mr. Gibb), who has campaigned tirelessly on this issue. I hope that Members in all parts of the House are pleased that we have eventually adopted a position that should lead to an improvement in our children's reading ability.
	On maths teaching and numeracy, I hope that the Government will take note of the many children throughout the country participating in the Kumon maths scheme, in which, I should point out, I have no financial interest whatsoever. There is a Kumon centre in Dunstable, in my constituency, to which many children from both independent and state schools go. A DFES study on this scheme would be useful. However, it is what goes on in schools that is crucial. The money is welcome, but it is hard for children to get the education that they will need in a competitive world when discipline and control are absent.
	A lady in my constituency has been a teacher for more than a quarter of a century and she told me about an incident that happened in one of my upper schools only a couple of weeks ago. One class was being disrupted by a pupil and the teacher concerned was unable to handle it. He appealed for help from other staff, but nothing happened for half an hour. That was because the spare member of staff allocated to help in such situations was dealing with an incident in another classroom, where a different child was disrupting a lesson. As a result, the children in the first class to which I referred learned nothing for half an hour. Discipline is fundamental to education. The Government have launched a review into the matter, but some of our schools face very serious difficulties that we need to address.
	More funding was announced today for further education, and I welcome that. Further education gives people the second chance that they desperately need and which they did not get at school, but the Government have adopted a very stop-go approach. Dunstable college in my area lost 25 jobs and almost 1,000 student places last year because of a budget cut. Why cannot we have a smooth progression? What is the point of cutting funding one year and increasing it the next? That approach has a very serious impact on the morale of both staff and students.
	The Chancellor said that a link would be established between British students and American business schools. I am all for such schools, but why should taxpayers' money be used? The excellent Cranfield business school is near my constituency, and Luton university has very good business courses. I am sure that both institutions would welcome some of that money. No doubt American business schools turn out some excellent graduates, but I question whether taxpayers' money should be used for that purpose.
	The same stop-go approach is evident in respect of science. We all know that the science base is essential for this country's future, but science departments up and down the country are being closed because they are so expensive. A couple of weeks ago, I had the privilege of welcoming one of my constituents to the Terrace of the House, where an exhibition of her work was being held. She came to my constituency from Exeter, where the university's chemistry department had been closed because it was so expensive, and she now teaches at the Open university. The same thing is happening all over the country. Why cannot we have a consistent approach? I welcome the money that the Chancellor is giving to science, but science departments around the country should not be closing.
	Very little mention of health was made in the Budget speech. That was surprising, as all hon. Members know from their post bags that health is a very serious issue. My PCT is the Bedfordshire Heartlands, which has a deficit of 20 million. The Luton and Dunstable hospital has had to close an elderly care ward, and there is almost no prospect that Leighton Buzzard, the largest town in my constituency, will get any sort of community health facility.
	Matters are likely to get worse next year. The managers at my PCT are very good, but they have to operate under such severe constraints, in the form of directives and targets set by the centre, that it is very difficult for them to exercise good financial stewardship.

Jeremy Hunt: Does my hon. Friend think that there is a contradiction between the Chancellor's emphasis on stability and prudence and the way in which money was showered on the NHS a few years ago? That money was taken out of the service as quickly as it went in, with the result that many hospitals have had to close.

Andrew Selous: My hon. Friend is correctthere is no point in making money available and then taking it back. A smooth transition is the only fair way to treat people working in the NHS.
	I come now to pensioners. I agree with the comments made earlier that it is scandalous that the ombudsman's report into the 85,000 people whose pension schemes have collapsed has not been honoured. Some of my constituents worked for Dexion in Hemel Hempstead and so fall into that category. The Chancellor was happy to talk about the unclaimed assets going into youth services. We all support those services, but the 85,000 people who were forced to save for pensions as a condition of employment, and who now find that the money has gone, should have first claim on those funds. It is reprehensible that they do not and I hope that the Paymaster General, who is sitting on the Front Bench listening to the debate, will urge the Chancellor to reconsider the use of those unclaimed assets. As I said, the 85,000 people who have lost their pensions should have first call on them.
	What of the 200 payment for pensioners to help with their council tax? We had it last year, but not this year. We will all have constituents who are counting down the number of years that they can stay in their own homes. They run down their savings every year just to pay their council tax. That is simply not acceptable. Had we had a Conservative Government there would have been a halving of the rate of council tax for people over 65, up to a maximum of 500. It is deeply regrettable that the Chancellor has not given that 200 rebate this year and that we have not had a proper reform of council tax, which is long overdue.
	I welcome the emphasis on shared ownership in housing. Like synthetic phonics, that is another Conservative idea that the Chancellor is bringing in. In 1995, only 10 per cent. of young people buying their first home needed help from their parentsnow 46 per cent. of them do, if they are lucky enough to have parents who are able to help them financially in the first place. Looking at my constituency, we need the right homes in the right places. The Government's approach to the housing needs of London and the south-east is to ram all the housing into five areas around London. Housing should be spread across London and the greater south-east, and across the country as a whole. Two days ago, the Financial Times contained damning evidence about the fact that regional disparities in the UK have got worse. If that situation was slightly better, it would relieve the housing pressures on London and the south-east. The infrastructure for that housing is not there either, which leads to great worries.

Christopher Huhne: I may forgo a lifetime's obsession with macro-economics and look at some of the micro-economic aspects of the Budget, focusing on the environmental impact. I welcome the fact that the Chancellor has announced that he will index fuel duty in September and that he is indexing the climate change levy, but we have to put that in the context that was admirably spelled out in the Environmental Audit Committee report, Pre-Budget 2005: Tax, economic analysis, and climate change, which came out yesterday. If we update for today's announcement, figure 6 in that report makes it clear that, on fuel duty, there has been a revalorisation in only two and a half of the past seven yearsif we count the current period as a half year. On vehicle excise duty, we are looking at one increase in revenue over the past seven years. On the climate change levy, we are looking at one year out of the past seven years. On air passenger duty, we have had a freeze over all the seven years, with a steady decline in yields.
	If we look at the detail of what the Chancellor announced today, we can see, for example, that it is extremely unlikely that we are even going to see an increase in yields from the green taxes overall, given that he admitted that vehicle excise duty, although restructured, would raise less. The restructuring is actually extremely mild. On the increase for those at the top end, in terms of emissions, we are looking at a cost that will be less than the cost of filling a full tank of the average 4x4 gas-guzzler that he says that he is aiming at. The Energy Saving Trust recently came up with research that suggested that, if there is to be a genuine shift in the pattern of car-buying behaviour, there could be a need for a tax at the top end of more like 2,000 a year than 200.
	Lest there be any doubt among Treasury Ministersas there seems to be among Department for Environment, Food and Rural Affairs Ministersthat taxation through the price mechanism has an effect on behaviour, it is worth pointing out an extremely useful article in the latest Fiscal Studies from the Institute for Fiscal Studies, which cites a number of academic research studies, from Finland, Denmark, Sweden, Austria and Belgium, all of which clearly suggest that increased taxes and prices have positive impacts on behaviour when it comes to dealing with climate change. However, the Chancellor's record since 1997 shows a peak in green taxes of 3.6 per cent. of GDP in 1999, but that has fallen steadily so that the latest figure is only 3 per cent. of GDP, or a lower share than in the last year of the Conservative Government. Given the policy announcements today, there is no prospect of a rise either.
	The result is clear. The Government constantly remind us that they are set to meet our Kyoto target, but that is an exceptionally complacent spin on the reality, which is that the only reason we are meeting our Kyoto obligations is the felicitous shift from coal-generated electricity to gas-generated electricity, which had a sharp impact on the reduction of greenhouse gas emissions. The Chancellor has included a chart in the Red Book, chart 7.1, which usefully shows that carbon dioxide emissions have risen by 2.9 per cent. since 1997. The Government cannot be confident that they will continue to meet our Kyoto obligations or their target for carbon dioxide emissions unless they take a much more radical view of the need to change behaviour.
	The issue is a test of seriousness for the Government and for the Opposition, who are strangely silent whenever anybody mentions the possibility of using the price mechanism or taxation to direct behaviour towards a more sustainable pattern for the future of the planet, our children and our grandchildren. It is a basic economic point that such a change does not necessarily involve any overall increase in taxation. If 10 more is taken in green taxes, it can be handed back to the same people through a reduction in taxes elsewhere, thus leaving incomes unchanged but ensuring that the price incentive bears down on people's behaviour.
	I hope that Ministers will consider the policies that they have announced in the context of the longer run since 1997 and see how weak a reed the Chancellor has produced in this Budget. I hope that that spurs them to greater radicalism in dealing with what is, after all, the pre-eminent policy challenge of our time.
	Debate adjourned.[Tony Cunningham.]
	Debate to be resumed tomorrow.

36 ENGINEER REGIMENT (MAIDSTONE)

Motion made, and Question proposed, That this House do now adjourn.[Tony Cunningham.]

Ann Widdecombe: I am grateful for the opportunity to have this Adjournment debate tonight and I also wish to record my gratitude to the usual channels on the Government side who ensured that I knew that I had to be here somewhat earlier than I might have predicted.
	I am raising this matter tonight because it is an extremely grave one for the 36 Engineer Regiment and for the town that I represent. It is an irony that 19 years ago I had to fight exactly the same battle when it was proposed to move the regiment from Invicta barracks in Maidstone to, at that time, Thorney Island. It was a bleak prospect and the town and regiment rebelled. I am pleased to say that we secured a reversal of the policy.
	It would seem that yet again we are threatened with the removal of the 36 Engineers from Maidstone. I am sure that the Minister will accept that it is very important that morale is kept as high as possible in an Army that is stretched as badly as it is at the moment. Part of the maintenance of good morale is ensuring that families are happy, especially when the forces have to serve overseas for any length of time.
	The 36 Engineers is a sapper regiment, so almost by definition it spends a large amount of time abroad and has one of the highest rates of separation from spouses and families in the entire Army. It is thus essential for recruitment and retention that the soldiers can go away feeling that their wives and families are happily integrated in the local community. In turn, the wives have considerable influence over whether their husbands decide to stay in the Army. It follows that if there is general unhappiness with the serving conditions, the soldiers will not give a particularly happy account to potential recruits.
	In Maidstone, the 36 Engineer Regiment is based near the centre of a large town, which offers not only good shops but extremely good schools, including the envied grammar schools, and many opportunities for wives to work. The Gaffney report described the regiment's relationship with the town as ideal for a major unit. It is. Super-barracks are no substitute. They would need to be built and maintained, and would be costly. The regiment currently enjoys the freedom of the town, and the citizens of Maidstone and the surrounding areas regard the Army with immense gratitude following its intervention, first, after the 1987 wind storm when we had to clear roads urgently and, secondly, during the floods which, the Minister may recall, devastated parts of my constituency a few years ago.
	The Minister appears remarkably unmoved by all that, however. I shall quote from a recent letter from the Secretary of State for Defence. He said:
	I should tell you that the Army is committed to consolidating its estate into fewer and larger sites. As a result, a singleton site such as Invicta Park Barracks will be kept under review for possible disposal in the longer term. I should stress that no specific time lines have been established for this process but the points you make regarding the presence of 36 Engineer Regiment in the area will be taken into account.
	We should look at the context for that proposal to dispose of sites. On 21 July 2004, the then Secretary of State for Defence announced to Parliament what he described as a radical change in the future force structure. Since 1997, the trained establishment has actually declined by about 6 per cent. at a time when the reserve has fallen by nearly 68,000, including a fall of 20,000 in the Territorials.
	The cuts make no sense at all, given what we require our armed services to do. We should have taken notice of the recent situation when we wanted both to deploy troops in Iraq and to keep them on standby during a firemen's strike. From talking to members of the 36 Engineer Regiment, I know that that placed considerable strain not only on their resources but on the ingenuity necessary to manage both operations.
	The cuts should be reversed. We should be making sure that we have a properly manned force rather than a reduced one that is operating with a reduced reserve. In the last 12 months, the outflow from the Army has exceeded the inflow by about 3,500, which led my right hon. and learned Friend the Member for Folkestone and Hythe (Mr. Howard) to tell the Prime Minister that as our forces were so overstretched it was hardly the time to cut four battalions from the Army.
	Since the last time we went round this course, that proud regiment has fought in both Gulf wars and has been involved in every other conflict. The Secretary of State for Defence has said that there is no specific time scale, but I think that he means by 2012, which is the time to which the Army is operating in considering the creation of super-barracks and the disposal of sites. Of course, 2012 is a mere six years away. The loss of the regiment would be a severe loss to Maidstone. Although I appreciate that this is not the Minister's direct worry and that it is more properly the concern of the Deputy Prime Minister, it would be a very great worry to Maidstone if that site were replaced by development.
	Our infrastructure is already extremely pressured. We do not have enough water. We do not have sufficient roads. Our schools and certainly our health services are stretched and, of course, we have to face up to the huge extra developments being foisted on us by the Deputy Prime Minister. If we were also confronted by a major site, such as Invicta barracks, being covered by housing development, it would be a great deal more than Maidstone could stand.
	Quite apart from those worries, we want to keep the regiment in Maidstone, as we wanted to do in the late 1980s, when we faced the same threat of removal but for different reasons. We want to keep it because we are proud of it. We are particularly proud of the Gurkhas. We want to keep it, because it makes a major economic contribution to Maidstone and because we believe that we, in turn, provide the Army with a very good background against which troops can go abroad satisfied that their families are fully integrated into the local community. Our schools would be regretful if those children were suddenly to disappear to super-barracks somewhere else.
	The creation of vast Army sites is not a substitute for a major unit in close association with the town in which it is stationed. I ask the Minister to think again. It would be very optimistic of me to think that he would give me every reassurance that I have sought tonight, because that is rather unlikely, but I hope nevertheless that he will, at the very minimum, agree to visit the 36 barracks at Invicta and talk to the officers and men and, of course, the Gurkhas who are involved there. I hope that he will also consent to hold conversations with Maidstone borough council about the impact on the town if that Army site is disposed of and the force sent elsewhere.
	The 36 Engineers have been associated with Maidstone for more than 60 yearsa long association that has been fruitful both for the regiment and, indeed, for the town. I therefore very much hope that some singleton sites will not be disposed ofa few must surviveand I should be grateful to the Government if Invicta barracks were among the few that survive.

Adam Ingram: I congratulate the right hon. Member for Maidstone and The Weald (Miss Widdecombe) on securing this debate and providing me with the opportunity to speak on the issue. I did not know that in the past an attempt was made to close the barracks. I was not advised of that, but it is now received wisdom.
	We are now attending to the reorganisation and better definition of our armed forces because previous Administrations did not seize the reality. They did not face up to the harsh choices that had to be made in restructuring the Army overall. I do not necessarily comment on Invicta barracks in saying that, because I do not know the details of what happened at that time, but we are addressing the problems of that legacy. That is not driven by cuts or financial imperatives, but because the Army and the chiefs of staff have determined that there is a better way to organise the armed forces. That is what we laid down both in the future infantry structure and the future Army structure generally.
	I pay tribute to the right hon. Lady for the interest and support that she has shown for 36 Engineer Regiment at Invicta Park barracks and, more generally, the Gurkhas, which she mentioned
	It being Seven o'clock, the motion for the Adjournment of the House lapsed, without Question put.
	Motion made, and Question proposed, That this House do now adjourn.[Tony Cunningham.]

Adam Ingram: I apologise, Mr. Deputy Speaker. I take it that my words will still be on the record.
	I was congratulating the right hon. Lady on her deep interest. When I asked those who were briefing me how closely engaged she was, I was told that she is a very good friend of the regiment. We value such close engagement of Members of Parliament and their local Ministry of Defence interests, whether they are military or civilian, or, indeed, both. I also know that she has the best interests of the regiment, the Gurkhas and her constituents at heart.
	As the right hon. Lady knows, the Royal Engineers has a considerable and noble history. Its construction activities are as relevant today as they have ever been. Recent events have seen Royal Engineers soldiers providing disaster relief and humanitarian assistance to the earthquake victims in Pakistan. A small team of sappers has been involved in bringing fresh water to the villages of Kpalusogu and Koshibu in northern Ghana. I recently visited Ghana to open the second phase of an internationally supported peacekeeping training centre and was briefed on the work done by Royal Engineers personnel in Ghana and the contribution they were making. They were performing a non-military role in one sense, but clearly building on the defence diplomacy that is essential to keep our partners and allies supportive of us.
	Such innovation has continued through to the present day, and 36 Engineer Regiment, in particular, should be proud of its contribution. Today, soldiers from 36 Engineer Regiment serve all over the world in Iraq, Afghanistan, Belize, Norway, Gibraltar, Kenya, Brunei, the Balkans, Nepal, Cyprus and Canada, as well as Northern Ireland. I am really grateful for the part that 36 Engineer Regiment played at the beginning of current operations in Iraq and subsequently in two further squadron deployments. The entire regiment was deployed for the initial conflict phase of operations. I pay tribute to the men and women of 36 Engineer Regiment, who truly show what it means to be part of the best trained and most professional Army in the world.
	The regiment has developed a significant attachment to its current home, Invicta Park. Its links with Invicta Park stretch back to 1949, when it was stationed there for two years. It moved away for eight yearsfirst to Ripon and then to Osnabruckonly to return in 1959, since when Invicta Park has remained its home. I recognise the importance of the historical connection and the links that have been developed with the local community. I also recognise the need for our soldiersthose brave men and womento have decent homes. It should be noted that over the past five years we have spent around 2 million on maintenance, upkeep and improvements to Invicta Park.
	Contrary to the somewhat unhelpful speculation in the local media, there are no plans to close the Invicta Park site. The right hon. Lady correctly referred to the letter that she received from my right hon. Friend the Secretary of State that observed that the Army is examining the possibilities for consolidating its estate into fewer and larger sites in line with the Defence Estates strategy of developing and rationalising the MOD's estate holdings. The logic of doing that must be sound. The armed forces must examine their real estate and its quality all the time. It must examine the prospect of building new facilitiessuper-garrisons, if that is how they are to be describedfor our personnel. If that means that we must examine the existing estate and determine what can be realised by way of assets, it is a sound approach. It is nothing new. It has been the consistent approach of previous Governments. We are, admittedly, taking another big step forward.
	Again, the logic of looking at disparate barrack sites is sound. An estate that is spread out costs a lot of money to maintain. The purpose is to get money to the front line. The armed forces benefit greatly from close community links. We very much value looking after personnel in the ways that we do in the areas that we are in, but it is an imperative of the Ministry of Defence to rationalise and get the best use of the taxpayer's pound, and to ensure that it is invested in equipment and support for the front line. Those are difficult equations to balance, because there are many aspects to consider.
	I do not want to make a party political point, but a decision was made in the 1990s not to invest in real estate. There is now a massive catch-up, the scale of which is truly phenomenal. We are already committing about 1 billion over the foreseeable number of years to complete that catch-up, although a lot of the estate has not been maintained, no new build has taken place and large parts of it were sold off. The assets realised from the sums that were received when the right hon. Lady was a member of the Government did not all come back to defence. We are operating on the basis that all the rationalisation and efficiency measures will be retained for the defence purposes that I mentioned. A qualitative change has taken place.
	The point of building new super-garrisons is to give greater continuity to people overall and to provide them with better accommodation, probably on new sites, although sometimes existing sites will be developed. They will allow people to integrate properly with the civil community.
	The right hon. Lady mentioned how our armed forces are stretched and the pressure that they, and in particular the Royal Engineers, are under. I recognise that. It is one reason why we have defined the new way forward in terms of the future Army structure. As a result of rebalancing, 2,400 posts have been reallocated to what would be defined as the key enablers. Engineers fall into that category. We understand that we have put a huge strain on those key enablers, and the Royal Engineers have been part of that. We are therefore reinvesting 2,400 posts.
	The right hon. Lady also mentioned in passing the important role of the TA. I do not want to get into the detail of that, because I am due to announce shortly our approach to TA rebalancing. However, the Royal Engineers will benefit from that as well.
	We cannot achieve everything overnight. It takes time. We have to let things grow. However, we are on the case.
	We have not established firm timelines for the work on which we have embarked. There is no particular focus on Invicta Park. It is not as though a work stream is saying, Let's look particularly at a range of barracks, of which Invicta Park will be one. Nothing is in the machine at this stage and nothing is immediately coming over the horizon. That is why I say that the speculation about the threat to Invicta Park is a bit premature. I do not deny the right hon. Lady her entitlement to raise the subject and to take the arguments forward. I would do the same in her position. However, Invicta Park is in the same position as other barracks of equivalent size on the Army estate and no plans to relocate 36 Engineer Regiment are on the stocks.
	I cannot be more precise because of some of the arguments put about the way in which we are assessing the situation and investing in the future as those plans develop and evolve.

Ann Widdecombe: I sense that the Minister is on his last couple of pages, so may I ask whether he would agree to visit the barracks and talk to the men?

Adam Ingram: I make a lot of visits

Ann Widdecombe: One more.

Adam Ingram: Yes. I am more than happy, time permitting, to do so. I benefit a lot from such visits, and I hope that those whom I visit benefit too. It allows them to tell me what they think and to put their views. On such a visit I would be able to say to them what I have sought to set out today. No doubt the report of these proceedings will be disseminated. I just hope that the arguments that I am advancing get a fair shake in the local press.
	There are no plans for closure. We have invested over recent years and we are looking at ways in which we can invest to meet our commitments under the Gurkha married accompanied service rules. The Government have taken a major step forward and we are having to address some very important issues about the Gurkhas who are based at Invicta Park. I have set out to make it clear that there are no plans that put Invicta Park under immediate threat, and there are no timelines. At one point, there was a timeline of 2012, but that no longer applies, and for a very good reason: funding. It takes a lot to invest in infrastructure, and when we are doing so we are not investing in equipment and personnel. We must balance the priorities across the various resources.
	I am happy to visit, but I cannot say that I will do so immediately. The right hon. Lady will be notified if I visit. I hope that I will not be met by a demonstration at the gates. I know that she would not operate in that way. I genuinely like to engage with our people and to hear what they have to say, because it allows me an opportunity to put across our point of view.
	I hope that has helped the right hon. Lady's understanding of where we are coming from and of the overstretch issue, which she mentioned. I recognise that there are pinch-point problems, and we are addressing them. She has just to wait a bit longer for clarity on TA rebalancing. Investment is going on and will go on for the Gurkhas once we can find the resource allocation to enable it. We will continue to maintain Invicta Park for as long as the 36 Royal Engineers are there. We are proud of the regiment and of what it does. I know that the right hon. Lady is a great advocate for all that it does.
	Question put and agreed to.
	Adjourned accordingly at twelve minutes past Seven o'clock.